Octopus recently introduced a new refurbishment loan product available to brokers to enhance UK housing quality, emphasizing energy efficiency.
Octopus grants a reduction in interest rates to encourage borrowers to make such enhancements. Projects that attain an EPC of C or above and improve their Energy Performance Certificate score by at least 20 points are eligible for this rate reduction when the loan is paid off.
This loan was paid off earlier this month for a property in Cromer, Norfolk, a favoured vacation spot. The borrower enjoyed a 1.8% interest rate discount on a proportional basis.
“A short-term refurbishment loan gives property owners the freedom and power to upgrade and increase the value of their properties. The interest rate discount we provide is a major attraction in today’s economic environment.”
– Suparn Sapatnekar, Octopus Real Estate
The borrower used the loan from Octopus to transform a mid-terrace Victorian property near the sea with an initial EPC rating of D (58 points) into four flats, three with a B rating (81 points each) and one with a high C (78 points). These enhancements, which improved energy efficiency through better insulation, new boilers, double glazing, and energy-efficient lighting, cost approximately £18,000.
An experienced developer completed the project in five months. By meeting the necessary EPC upgrades and earning the interest rate discount, the borrower saved £3,300. Moreover, one of the flats sold well above the expected value to a cash buyer.
David Hue from Embassy Finance was the broker managing the case.
Suparn Sapatnekar, Head of Residential Bridging Credit at Octopus Real Estate, said: “Our refurbishment loan product is becoming popular for those looking to retrofit old homes with eco-friendly technologies.
Research has shown that 19% of landlords finance renovations with credit cards or other short-term loans, while 60% use personal funds or investments. While these methods provide certain advantages, they could also restrict the borrower’s ability to grow by depleting cash reserves or be limiting due to credit caps.
“A short-term refurbishment loan offers them the freedom and ability to not only improve their properties but to enhance the value. Our interest rate discount is of course also a huge draw in the current climate.”
Steve Matthews, Head of Residential Lending at Octopus Real Estate, noted: “There’s growing evidence that properties with green improvements fetch higher prices and rents.
“As concern for climate change increases, the demand for energy-efficient, tech-engaged properties is rising. These properties are more appealing and command higher values. Moreover, they contribute to the global effort of maintaining a green, clean planet.
“Our refurbishment loans allow landlords to make these energy improvements, making their properties more attractive to buyers and renters. After all, who wouldn’t prefer living in a cosy, energy-efficient home with low bills compared to an outdated and unrenovated one next door?”