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Green Mortgages - comments for Mortgage Strategy article

Journalist: Emma Simon, Mortgage Strategy

ended 20. April 2023

I'm putting together a feature on green mortgages and looking for comments from brokers on whether these are popular products at present, and how this market might develop. 
 

Seeking specific comments on the following: 

What is the market for green mortgages at present? Is there more demand in the residential or BTL sector?

How has the market grown in recent years – in terms of number of products/ variety? Are there fixed and variable options for example, at a range of LTV bands?

What sort of savings are available with green mortgages - relative to a standard mortgage?

What sort of properties are these available on (Assuming largely new builds with the highest EPC ratings) 
 

Have rising energy prices increased demand for properties that are more energy efficient - is this driving in turn demand for green mortgages?

How might this market develop in future? Are there similar products that might be developed for older homes where renovations/ energy efficiency measures have been installed?

Ideally looking for comment this week - by end of play Thursday 20th April 


 

 

 

 

6 responses from the Newspage community

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Editor
Justin Moy
Managing Director at EHF Mortgages
We have seen very little interest in Green Mortgages so far, there are other pricing issues in the current market, and the Green incentives have certainly taken a back seat. Other than New Build properties, very few are showing an EPC high enough to qualify anyway, and the benefit of these specific mortgages, such as a cashback or small reduction in the rate, is no where near enough to cover the work typically needed to improve the EPC rating.

The activity needed by Landlords to bring properties up to a 'C' rating by 2028 will no doubt increase awareness of EPC's, and improvements that can or will need to be budgeted for, we have greater issues with the available of any property either for purchase or for letting, and whilst minimum standards are obviously important, setting that bar too high could have a real adverse effect on the letting market.
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Martin Leonard
CCO at Dashly.com
There are around 15m properties in the UK with an EPC rating of D or lower so demand should be huge. However, consumers aren't thinking about green mortgages as they don't really know what they are or the benefit to them.

Most people consider the energy efficiency of their home to be important, but only a small percentage are likely to use existing types of finance to upgrade their homes. Building demand for green mortgages will require the expertise of mortgage intermediaries to ensure the advice is sound, the products are fit for purpose and the long term benefits are evident to the customers.

There is more demand on the BTL side as regulation requires landlords to act now. Landlords believe there will be a cap introduced on the spend required to make improvements to properties and many are looking for portfolio products that will allow them to release equity from across their assets to make the improvements required.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
Green mortgages are very new and lenders are rapidly evolving their product offerings in this market. It began with discounts or cash backs, as these are the quickest and simplest amendments lenders could do to start themselves on the "green" journey - but they rewarded those that already owned, or were buying, efficient homes rather than encouraging people to improve less efficient ones. Some lenders attached the cashback element of a deal to proof that the EPC had been improved, which then encourages owners to act. We are now starting to see some lenders amend their affordability models so that more energy-efficient homes lower running costs and allow borrowers to take larger mortgages, which is another interesting take on how to make mortgages "greener". I'm not sure which of these is the right course of action, maybe it's a combination of all of them, but we are certainly starting to see change and that change is gathering pace.
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Austyn Johnson
Founder at Mortgages For Actors
Across the board, its not that likely that a green product will be the best one for the client. Some lenders are offering them, but the majority of green lending we do is when either the deal stacks up best, or the clients have requested one when a non-green has been cheaper. For green products to really work, they need to make significant changes such as no fees or much lower rates.
It would be amazing if X lender had a better affordability test if the property is in the better EPC range - the better EPC houses are, after all, supposed to have lower utility bills.
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Gary Bush
Financial Adviser at MortgageShop.com
So-called Green Mortgages are few and far between and often only show minor differences in rate terms or offer a few hundred pounds benefit to the clients - mind you lenders have been distracted in the last year. Speaking personally I'd like to see lenders agreeing for applicants who have signed up for an Energy Performance home improvement Remortgage for the lenders upon seeing the property improve their EPC banding to then allocate monies to fund community improvements following a green agenda e.g. home insulation, water efficiency, upgrade communities lighting to led, localised battery power backup for public use using solar panels on government town hall roofs, providing triple glazed units, etc but maybe I am living in a fantasy land. This type of lender scheme would surely be far more beneficial and have real-term collective buying benefits than a small cashback to an account holder who might not want the benefit but to pass it on to people in their community.
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Kevin Dunn
Mortgage and Protection Adviser at Furnley House
For Green Mortgages to really drive buyers’ decision-making, there must be some serious incentives on offer for energy-efficient homes. Banks, being mostly money-making machines, are extremely unlikely to offer these unless supported by the government.
Green mortgage products are readily available; however it is more apathetic, and a tick-box exercise, with few lenders making any real difference and savings being negligible (typically 0.1% off a rate, or £250 cashback). Not enough to drive any buying decisions.
I would stick to the Energy Rating system and like to see lenders simply cutting their margins, with or without government support, for these green products (on properties with an EPC rating of A-B) if they are serious about lending in this area. Anybody improving their EPC rating should be swept up within a healthy green re-mortgage market, with similar rewards on offer.