Secure Trust Bank Real Estate Finance (STB REF) has launched a new green finance scheme for residential property investors.

The Greener Homes Scheme comprises two new products - the Green Residential Investment Loan and the Green Improvement Residential Investment Loan - which offer favourable interest rates to borrowers investing in new green residential investment portfolios or upgrading existing properties to make them more energy efficient.

Secure Trust Bank has committed to providing up to £100 million in loans to support the scheme. Loans are available from £2m - £45m at competitive rates.

To qualify for the Greener Homes Scheme, borrowers must meet specific green lending criteria and demonstrate a commitment to reducing carbon emissions.

The Green Residential Investment Loan offers loans secured against portfolios where 90 per cent of properties, measured by area, have an EPC rating of A, B or C.

Similarly, the Green Improvement Residential Investment Loan requires 90 per cent of properties in a portfolio to have an EPC rating of D or above, but includes a mechanism to reduce the interest rate if 90 per cent of properties achieve an EPC rating of C or above. Following works, the rate will then be the same level as the standard Green Residential Investment Loan.

Secure Trust Bank's entry into the green loans market is in response to the growing focus on ESG and the decarbonisation agenda, partly being driven by government policy and regulation.

The UK Government has set a target that all private rented homes in England should be upgraded to minimum EPC band C rating by 2030.

According to latest EPC figures published by the Government, in Q4 2020 only 40 per cent of EPCs lodged on existing homes had a rating of C or above, compared to 84 per cent of new homes that achieved an EPC rating of A or B.

In the development sector, as part of the Future Homes Standard, the government has set a target for new homes to produce up to 80 per cent lower carbon emissions compared to current levels, with new builds expected to produce 31 per cent lower carbon emissions from 2021.

Chris Daly, relationship director at STB REF, said: "The provision of a green loan facility to encourage, support and incentivise sustainable property investment and development is something we have been looking at for a while.

"With pressure mounting on the real estate sector to do more to incorporate sustainability into investment and development strategies and adopt greener practices, we felt the timing was right to launch our own green finance product.

"Our existing credit policy already states that all new lending to residential portfolios should be against properties with an EPC rating of E or better, but the new Greener Homes Scheme takes this a step further by offering a financial incentive.

"The scheme is currently only available to investors, but we are looking at developing an additional product that could be offered to housebuilders in the future."

Secure Trust Bank's Real Estate Finance team provides lending facilities of £1m-£45m to residential and commercial property developers and investors, from SME housebuilders to UK-based funds.

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