Mortgage lender Nationwide has introduced an interest-free product range to allow homeowners to make green energy improvements to their homes.
Mortgage brokers have responded positively to the announcement, with many saying this is the sort of green product innovation the industry has been waiting for.
However, given the relatively small loan size, many borrowers will likely be “pushed to go direct” as the workload involved for brokers would be unjustifiable given that the additional borrowing will require a full underwriting process.
The green additional borrowing range will be available to Nationwide mortgage holders from June 1.
A spokesperson for the lender told FTAdviser it will be made available to 5,000 houses initially.
In a statement on its website, Nationwide said: “Making the right home improvements could save your clients money on their energy bills and reduce their carbon footprint. But for many, the initial cost can be a hurdle.”
To help tackle this, the product range will see borrowers able to take out loans of between £5,000 and £15,000 with zero interest payable for up to five years.
Products will be available on a two or five year fixed basis, after which point the interest will revert to Nationwide’s standard mortgage rate, which is currently 7.74 per cent.
The entire loan must be spent on green home improvements, such as:
- solar panels
- air source heat pump
- window upgrades
- boiler upgrades
- cavity wall insulation
- loft insulation
- an electric car charging point.
Borrowers will be offered lending up to 90 per cent loan-to-value, meaning they will have to front some of the cost of the improvements up front themselves.
Commenting on the range, Chris Sykes, technical director at mortgage broker Private Finance said he was pleased to see this launch and added, “we love product innovation”.
Sykes said however, that the level of underwriting that is required will make it a very resource intensive task for brokers who would likely have to run the work needed on it at a loss.
“Don’t get me wrong, this is the sort of product innovation we need and may well be a stepping stone for other lenders to do the same or better,” Sykes said.
“It will help some people and likely save them money in the long term if the green improvements do start saving them money.
“However, it could be tricky for some people to get, as Nationwide will likely use their new affordability calculator when seeing if this additional borrowing is doable, and that plugs in the latest ONS data on costs of living, plus stresses mortgage debt at the new interest rates we are seeing.”
“On top of this I doubt many brokers will want to help clients with this as it would literally run at a loss for brokers due to the loan size and payment from Nationwide on it, so clients will likely be pushed to go direct to get this which could be a lot of work for many,” Sykes added.
Overall, Sykes view was that in a lot of cases this loan could be more stress then it is worth, but for others it could be completely worth it and make a big difference.
Nicola Schutrups, managing director of broker The Mortgage Hut added that the move by Nationwide is a "forward-thinking approach for those homeowners who want to improve their energy efficiency, whether that be for remortgage purposes, to reduce energy costs or for some other reason".
jane.matthews@ft.com
