Greener home upgrades are great but not worth it, say brokers

Installing solar panels seems like a good idea and can save hundreds of pounds in energy bills, but the sheer cost of installing them mean they are not suitable for the majority of clients, according to brokers.

The same goes for other "big ticket items" such as heat pumps, double or triple glazing or new boilers, unless the government comes up with more effective funding options.

The exception is buyers who have found their forever home, who could stand to benefit from making their home green, according to the brokers.

Stephen Perkins, managing director at Yellow Brick Mortgages, said: "The return on investment period is still well over 10 years on most improvements, and often much longer.

"Therefore, unless you plan to live in the property long enough to realise the benefits this would not be worthwhile."

Michelle Lawson, director and mortgage & protection adviser at Lawson Financial, agreed. She said: "Whilst the intentions are good, the cost vs reward just isn't usually financially worth it.

"There are small wins that can be carried out such as insulation and lighting, however the big ticket items such as the solar panels and heat source pumps are less advantageous."

It's a case of landlord pragmatism vs environmental idealism, and right now, survival instincts take precedenceImran Khan, co-founder & CEO at PropertyLoop

The price of green energy technology such as solar panels has reduced significantly since the 1990s as adoption became more widespread and technology more advanced. In the UK it typically costs between £6,000 and £11,000 to install the panels, depending on size.

"Now, solar panels are twice as powerful and half the price," said Andreas Thorsheim, CEO and founder of European solar marketplace Otovo. "The hardware costs have dramatically gone down, and the main barrier left to mass adoption is high labour costs," he explained.

Thorsheim predicted "one-third of energy will be used where it is produced within 20 years and that eventually, solar installations will be almost free because the price is coming down so rapidly.”

Darryl Dhoffer, mortgage expert at The Mortgage Expert, illustrated the potential benefits he would currently have from making green improvements to his home.

His home has an EPC rating of D. According to the government EPC rating website, he could make a saving of £628 a year on heating/water and lighting costs, by making the following changes: upgrade wall insulation, floor insulation, solar water heating and add solar panels for electricity savings, with an average cost to install of £21,700.

"It would take me 34 years to break even," he said, adding: "Oh and my EPC rating stays at D. This is an all too familiar story I'm afraid, up and down the country. Green mortgages would still not be available for me, so no cost savings on these mortgages either.

"Until the government steps in with support schemes and grants to help consumers upgrade their homes, then I can't see too many people making upgrades to their properties anytime soon, even if they want to."

Lenders have started to offer favourable mortgage terms for homes with better energy efficiency ratings to improve their portfolio, while for landlords the government is planning to impost stricter rules on the energy efficiency of their properties from 2028, and from 2025 for new tenancies.

Property consultant Joe Garner believes this is the right way forward. "I wholeheartedly advocate the idea of homeowners investing in home insulation and incorporating authentic energy upgrades like solar panels and energy-efficient heating systems," he said.

"This approach not only yields immediate benefits in terms of reduced energy bills but also serves as a prudent shield against the evolving minimum energy rating mandates that are already rolling out for commercial and rental properties. It's a forward-thinking strategy that ensures long-term sustainability while keeping energy costs in check."

But the investment might not be future proof, said Adam Wells, director at Lloyd Wells Mortgages. He said it was all about finding a balance when it comes to going green.

"We all need to do our part, but we also don't want to spend a ton of money on something that might not make a big difference in the long run.

"Solar panels and heat pumps are great options, but they can be expensive. And who knows, the technology might be obsolete in a few years."

Better funding needed

Many brokers believe the measures put in place are not enough to entice cash strapped borrowers to make further investments, especially in the current inflationary environment.

"In the current climate, for the majority of borrowers their focus and main priority will be to ensure the mortgage cost, and household bills, can be paid each month, and the value of such home improvements will be much lower on the priority list," said Justin Moy, managing director at EHF Mortgages.

"The only way to accelerate this future-proofing will be through the use of grants and incentives that the government may make available, also mortgage lenders will need to be consulted too, just to ensure we don't have the issues of sub-letting for solar panels, which does cause some difficulty when homeowners wish to sell their homes."

Aaron Strutt, product and communications director at Trinity Financial, believes over the coming years owners will be forced to make changes to their homes so they are better for the environment. He expects more lenders to team up with energy firms to make this happen.

Though he added it could spell trouble ahead if not properly funded: "Landlords in particular already have to meet strict EPC ratings with many lenders and if the upcoming government rules to make rental properties more energy efficient come in, many will not have the spare cash or the desire to make the changes."

Scott Taylor-Barr, financial adviser at Barnsdale Financial Management, agreed the government was likely to increase pressure on home improvements as it strives to hit its net-zero targets.

A way to make it work, he said, was through more effective initiatives that ensure having a good EPC rating means the mortgage is lower, and through tax cuts that are given when buying energy-efficient homes.

Luke Loveridge, founder and CEO at Propflo, said he has spoken to lenders representing 90 per cent of the mortgage market this year, "and many are preparing to offer more generous retrofit mortgages including blended rates with low or zero per cent loans used for making your home more energy efficient."

But high interest rates could still put a spanner in the works, especially for landlords, said Christian Duncan, managing director at Manchester Mortgage Centre, who said: "I don't believe it's beneficial for landlords to consider this with the ever-increasing interest rates.

"I do however believe if you're in your forever home looking to future-proof your property to become 'green' and save money in the long run on energy prices is beneficial if you can stand the upfront costs."

Imran Khan, co-founder & CEO at PropertyLoop, agreed. "The truth is, landlords are battling to keep their heads above water, and investing in green upgrades offers no tangible returns," he said.

"Rent prices don't inflate because your property has solar panels or superior insulation. Moreover, most tenants don't set such criteria as prerequisites for renting.

"It's a case of landlord pragmatism vs environmental idealism, and right now, survival instincts take precedence."

carmen.reichman@ft.com