Modular housing businesses can produce precision-engineered homes that achieve an EPC A rating – equivalent to the top 1-2 per cent of the most energy-efficient homes in the UK. Using technology proven across Europe, this method of building can quickly provide cost-effective, energy-efficient buildings, from apartment blocks and terraces to semi-detached and detached houses.
At the same time, public demand for green financial products is soaring. In 2020 investors put almost £1bn a month into funds with environmental, social and governance criteria, according to the Investment Association. Responsible investment funds under management grew by two-thirds over 2020 to £56bn. That compares with just 7 per cent for all investment funds.
That appetite for green finance continued into this year, with retail investors putting a net £1.1bn into responsible investment funds in January. As Chris Cummings, chief executive of the IA, put it: “Responsible investment funds continue to capture investors’ imagination.”
Green mortgages, though, not so much. At the moment, many potential borrowers do not even imagine they exist.
This is despite the number of green mortgages across both mainstream residential and buy-to-let increasing from just 78 products in April to 400 in August.
Build it, and they will come
Typically, these products offer preferential rates or cashback for purchasers buying houses with an EPC rating of C or above, with many requiring at least a B rating. It is crucial that brokers are made aware of the green mortgages available to borrowers, so that they are well equipped to support clients on the options available to them.
While buying a greener property can now help cut the cost of borrowing, there is still a challenge around helping owners of inefficient homes that cannot easily be remediated. Other financial incentives available to borrowers are also limited. While the right kind of idea, the government’s Social Housing Decarbonisation Fund estimates that tenants would save around £170 a year on energy bills, which is around £15 a month – a drop in the ocean amid rocketing energy prices.
In a similar vein, the recent government grant offering UK households £5,000 to replace their gas boiler with a heat pump may not incentivise homeowners. Although a heat pump uses less energy, the cost of running a pump can be up to 50 per cent higher. If the cost of gas continues to soar, heat pumps may prove cheaper in the long run, however the actual savings or costs seem unclear.
