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Green mortgages not gimmicks

ended 06. September 2022

Ross Boyd, founder of the always-on mortgage comparison platform, Dashly.com, has said that the obscene rise in energy bills is the perfect opportunity for lenders to reassess the current batch of green mortgages, which are often little more than a gimmick. Boyd argues that, using personalised data to target and assess individual properties, there is nothing preventing lenders from embedding practical energy-efficiency measures using accredited providers into people's mortgages where applicable - with brokers leading the way in coaching and advising borrowers on the value and merits of this approach. This would be in the interest of both the homeowner who will pay cheaper energy bills, the lender, as energy-borrowers are less likely to default due to astronomical energy prices, and both lender and borrower as energy-efficient properties will retain value relative to their non-energy-efficient counterparts. Boyd says now, amid the unprecedented cost of living crisis, is the time for the mortgage industry to go green in earnest rather than continue along the current path of largely token green products, with advisers playing a key role in raising the subject of residential retrofitting with their clients, thereby accelerating the nation’s path to net zero. Dashly is already in conversations with a number of major high street lenders about creating these loans. So a few Qs:

  • What are your thoughts on this?
  • Should lenders be doing more to make homes more energy-efficient by making it part and parcel of loan offers on low energy efficiency homes?
  • Would the opportunity to discuss genuinely energy-efficient mortgages add value to your conversations with clients as energy bills soar and climate change becomes an ever more important issue to borrowers?

12 responses from the Newspage community

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Marcus Wright
Managing Director at Bolton Business Finance
I won't hold my breath, but if mortgage providers can come up with a truly innovative way for houses to become more green it could revolutionise the housing market. Let's take solar combined with battery storage as an example: an average size system may cost around £10,000 to be installed. This could save a household £150 per month plus from energy costs, possibly more if they have an electric car. That £1,800 annual saving could be used to pay for the system as an add on to the mortgage.
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Michael Aldridge
Director at Lucra Mortgages
We shouldn’t need more reasons to put the future of our planet ahead of short-term profit goals but if it helps tip the balance then I’m all for it. With an estimated 40% of UK emissions coming from UK homes, the mortgage market finds itself in a privileged position to make a significant difference towards net zero and none of us should take this responsibility lightly. I agree with Ross that lenders could think more broadly and do more than they already are (we all could) but I feel they should act to encourage rather than penalise, offering incentives for energy efficiency improvements rather than worse rates for those with low EPC-rated homes.
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Graham Cox
Director at Bridging Hub
Incentivising the transition to energy-efficient homes makes a lot of sense. At the moment, green mortgages are only very slightly cheaper than non-green products. And they mostly benefit people buying an energy-efficient home, rather than creating one. Our housing stock is the worst in Europe, with many homes draughty, poorly insulated and damp. Ultimately, policy has to be led by Government. Energy-efficiency grants and long-term interest-free loans could do much to help people improve their properties. And lenders could make loans conditional on upgrades being carried out within say, three years, with an interest-only green loan added to the mortgage and spread over the term.
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Sabrina Hall
Mortgage Adviser & Protection Adviser at Kind Financial Services
If lenders want to do something truly innovative to support a green housing agenda then what about interest-free grants for things like solar panels, heat pumps and insulation? Perhaps the reduced energy bills could be used to repay the loans on these properties or maybe these are just repaid as a lump sum when the property is sold? Can lenders offer practical support for more everyday usage such as offering to fit thermostatic valves or replacing older energy-guzzling devices as part of the mortgage deal? If lenders truly want to support and influence homeowners into having greener homes they have to be much braver and innovative with their thinking.
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Imran Hussain
Director at Harmony Financial Services
Green mortgages right now, in the main, have been for those who are purchasing new build homes, and there has been very little to encourage older home borrowers to make improvements as the rates have not been that much more favourable to benefit a client to spend thousands on home improvements. Potentially this will now change with rising energy costs, but the products have to be appealing in pricing to have more uptake from older property homeowners.
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Rob Peters
Principal at Simple Fast Mortgage
The opportunity to make homes energy efficient through additional borrowing or investment into the property has always been there, but there is no greater incentive than the present as the balance of cost has shifted to make green energy much more cost effective for most given the monumental hikes in energy prices.
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Mike Staton
Director at Staton Mortgages
As far a I am concerned at the moment, green mortgages are a marketing gimmick used by lenders to appeal to a certain market. Only last week, I did a mortgage for a client where the lender was offering £1,000 cashback if the property increased an EPC level within six months of the purchase. The client worked out that it would cost him £13,000 to get to that next level. I agree that more needs to be done in order become more energy efficient, but we are not on this planet if we think small incentives like the current Green Mortgage incentives are going to make an impact.
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Rhys Schofield
Brand Director at Peak Mortgages and Protection
This is an area that is only going to grow and grow. I'm treating myself as a guinea pig and have my own energy performance report being completed this week to come up with a schedule of works to make my property more energy-efficient and potentially more or less eliminate my bills. If everyone looked at this come remortgage time, the potential extra borrowing on a mortgage would likely be dwarfed by the huge savings in utility bills. It's only a matter of time before lenders with their fingers on the pulse stand up and take note.
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Ian Hewett
Founder at The Bearded Mortgage Broker
Green mortgages are a good idea. I am just curious as to the training and regulation of the EPC surveyors. On my rental property, it has a D because the surveyor couldn't see if the roof was insulated. If they had bothered to go through the hatch I had built for easy access to the roof cavity, guess what, they would have seen lots of loft insulation. Some older properties will never attain the highest level required due to the materials used to build it and the return on investment to alter it would not be worth it. My current property is a B and at the time I purchased it, green mortgages were not a thing. When it comes to remortgaging, it will be interesting to see if it makes any difference to my interest rate.
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Clare Sheffield
Mortgage Advisor at Staton Mortgage & Protection Specialists
Green mortgages in principle are a great idea, however in reality I find my clients can't benefit from the rewards. When getting a mortgage on a New Build Development, the first thing a lender requires to secure the product to mortgage offer is a copy of the Energy Performance Certificate in order to qualify for a Green Mortgage. However, in most cases these have not been completed at reservation stage. Most mortgage lenders I have dealt with will not allow the product to be reserved without this, therefore leaving the client on a more expensive deal due to the builders not actually caring about the client's financial wellbeing. It's high time lenders considered the Standard Assessment Procedures in order to secure the product to then condition the mortgage with receipt of the Energy Performance certificate - or even better why not liaise directly with the builder so both the lender and the builder can provide the client a great experience when purchasing a new build?
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
The government is very keen to pass responsibility for making homes greener onto mortgage lenders. The cynic in me thinks this allows them to also pass the blame if things don't quite move as quickly as they would like. It also misses a huge amount of households that don't have a mortgage, or have a mortgage but are not actively looking to engage with it or change it, quite happily sitting on their lender's Standard Variable Rate. As a mortgage broker, I am starting to get concerned at the levels of knowledge and expertise we seem to be needing in various fields; not only do we need to know the mortgage and insurance products and regulations inside and out, we also need to be experts in looking out for fraud and financial crime, as well as being able to guide clients about the housing market in general, property surveys and the conveyancing process. Now we also need to be trained on the most effective home improvements for maximum reduction in energy cost, which will no doubt also entail having to learn (and then keep up to date) about the various planning restrictions and legal issues around these areas. Do we need to make UK housing stock greener? Absolutely. Are we asking too much of a relatively small part of the sector? Quite possibly.
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Gary Oxborough
Founder and Director at Barlow Irvin Financial Services
I am seeing that there are now quite a few lenders offering enhanced mortgage deals under the Green Mortgages banner. However, I think more lenders will start to offer these, as the cost of living crisis becomes worse. To qualify for one of these deals, your home should have an energy efficiency rating of A or B. This is a good incentive in my opinion. If your home doesn’t meet the criteria, there are many ways that you can improve the efficiency, such as installing better insulation or a new energy efficient boiler, to going all the way to installing solar panels. Clients even find that the savings they make on energy bills goes towards offsetting the cost of their project.