Glenhawk to reward EPC upgrades with loan discounts

UK property bridging lender Glenhawk has introduced a sustainability incentive to its lending, through which it will offer a discount to borrowers that improve a property’s Energy Performance Certificate rating during the loan term.

The London-based lender said it will provide borrowers with a rebate on the total facility amount, with a discount of 0.25 percent if the EPC has been improved to a C, or 0.50 percent if the EPC rating has been raised to B or above.

The incentive has been launched as the UK government phases in stricter regulation regarding minimum energy efficiency standards for the residential sector, which include rules coming into force in 2025 that will require landlords to show evidence their residential properties achieve a rating of C or higher in tandem with any new rental contracts.

Michael Clifford, commercial director at Glenhawk, said the loan discounts would support borrowers as that deadline approached. “It encourages our borrowers to deliver a product that conforms with future EPC regulations and appeals to the broadest possible market giving them the best chance of maximising capital and rental values and more sale or refinance options when exiting our loan.”

Compliance with minimum rating requirements would be “essential for landlords to continue operating” in the coming years, Clifford added, with higher EPC-rated assets “likely to return higher rental yields”. This would also maximise capital values at the point of sale, he said.

Glenhawk will apply the discount as a rebate at the end of the loan term. On a loan of £1 million (€1.1 million), for instance, the borrower would receive £5,000 back on the basis of a 0.50 percent discount.

The first phase of the initiative is being offered until the end of May, enabling the lender to test market appetite, with the feedback used to inform how this product may look beyond that date.

Clifford explained: “We want to make the incentive as attractive to the market as possible while also ensuring sustainable returns [for us] over the long term. Therefore we’ll be monitoring the market response closely, looking at application volumes, application type and the feedback from borrowers about what else they need.”

Glenhawk’s typical loans for residential refurbishment are between £250,000 and £10 million, with a maximum loan-to-value of 75 percent and a loan-to-gross development value of 75 percent, with a duration of between three and 24 months. But Clifford said borrowers were typically securing loans of around 12 months at present.

The London-based lender, which was founded in 2018, told Real Estate Capital Europe in September it was aiming to lend £1 billion by 2024 after it secured £200 million in additional bank finance to fund its expansion from UK lender NatWest Group’s investment banking arm, NatWest Markets.