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Have mortgage lenders done enough to jump start the housing energy efficiency drive?

Journalist: Anna Sagar, Mortgage Solutions / Specialist Lending Solutions

ended 20. July 2023

Interested in speaking to mortgage brokers about lender innovation around housing energy efficiency/green mortgages. 

A poll on Mortgage Solutions has shown that 70 per cent have seen no change. Around 23.3 per cent say they have seen some and 6.7 per cent have said yes. 

  • Are these figures surprising? 
  • What kind of lender innovation has there been so far? 
  • What would you like to see from lenders?

8 responses from the Newspage community

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Justin Moy
Managing Director at EHF Mortgages
There has been quite a muted introduction to Greener Lending, outside of the Nationwide Scheme with their Interest Free Loan, the odd cashback is easily lost in the wider chase for better mortgage rates in the current climate. Whilst Green Mortgages should equate to cheaper mortgages, the cost of bringing most properties up to an A or B rating will be more than the cashback on offer. Housing Efficiency is like buying organic vegetables - we all know they are potentially better for us, but the extra cost outweighs buying the 'normal' veg, especially at a time when everyone needs to find ways to save money.
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Michelle Lawson
Director at Lawson Financial
Energy efficiency is only a concern for a very small minority of people. The costs for solar panels and heat source pumps etc far outweigh the benefits given by lenders- a couple of bps or £250 cashback isn't really much of an incentive. The break even point for most major energy efficiency methods can be 10-15yrs or more so some people may not be in their properties that long to benefit. People also don't appear to be buying energy efficient properties first and foremost- location, layout and size still appears to be a priority for most.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
Whilst lower rates and minimal cashback on "green mortgages" for properties with low EPC ratings have benefitted some clients, this has been more by chance rather than a pre-calculated move. I do not believe a single client of ours has specifically sought out an energy-efficient home based on the potential mortgage rate or cashback benefit. If they have looked carefully at the EPC rating, it may be to save on the energy bills instead.

I think more lenders could offer deals on remortgages for home improvements that improve the energy efficiency of the borrower's home, for instance for installing solar panels, insulation or a heat pump system, similar to the market-leading product offered by Nationwide.

Some lenders talk about supporting the green movement but still insist on posting a paper copy of their mortgage offer to all parties.
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Russell Maggs
Mortgage & Protection Adviser at Maggs Financial Services
You only have to look as far as Nationwide to see the lengths mortgage lenders are going with their existing mortgage customers to drive up the energy efficiency of their housing stock.

0% interest on loans of up to £15k for Green Improvements. And the amount of information available to existing customers about how to make their property more "green" is vast across the big banks websites.

But innovation for new mortgage customers is slim.

There are some good products aimed at Buy to Let investors wanting to buy and improve a property's energy efficiency - but this needs to be more widely adopted ahead of the expected EPC changes in 2025 & 2028.

Unfortunately for residential mortgage customers, £250 cashback for having an already "green" home is nothing more than "greenwashing." More needs to be done to incentivise those with an EPC rating of D or below... not those fortunate enough to have purchased a property built more recently...
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Neezam Romjon
Co-Founder at Rebus Financial Services
I don’t find these figures surprising at all.

We have seen some positive developments from a small group of lenders, such as marginally lower interest rates and cashback deals, but the majority of lenders still aren't providing enough of an incentive to encourage homebuyers to choose energy-efficient and eco-friendly properties and should be doing more in my opinion.

We can't also ignore that some of the same banks that are offering £250 cashback for Green Mortgages are also heavily investing in fossil fuel production and other industries that are causing more harm to the environment. I'd love to see more banks leading the way with a more holistic sustainable approach to their business, not just on the lending side.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
This is a real chicken and egg type of situation. Is it that lenders need to bring out innovative products that encourage borrowers to make green alterations to their homes? Or, should they wait and see actual demand from the public for this type of mortgage, before we should expect to see lenders come up with solutions? In all the talk about making UK housing stock more energy efficient, it is the increase in the cost of energy that has got people seriously thinking about how to make their homes more energy efficient; this will increase further if we start to see house prices factor in EPC ratings - there will be a serious incentive to move your D rated house to a B if it will be worth more and be easier to sell.
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Gary Bush
Financial Adviser at MortgageShop.com
It's no surprise that the majority of lenders have had difficulty demonstrating that they are including energy efficiency innovation into their product ranges over the past few years - the UK has been bumping from Brexit, to Covid, to Ukraine War, to Inflation, it's been a bit busy. That's no excuse it's just a statement that it's been one hell of a ride.
What I'd expect from lenders are true "special" rates for Remortgaging clients who are borrowing further funds for home improvements including energy efficiency works - e.g. cavity or wall insulation wall works, grid and battery connected solar power, ground or air source pumps, water harvesting etc.
The opportunity is there for lenders.
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Rhys Schofield
Brand Director at Peak Mortgages and Protection
The biggest issue we face is that whenever we start to see some innovative ideas hit, like Nationwides 0% further borrowing for green home improvements we seem to enter another few months of blind panic around rising interest rates. Give us a settled market for more than 6 months at a time and I'm sure we'll see green mortgages gain traction properly.