One obvious thing that lenders can do to help is ensure they are offering deals, rates and products that really make a contribution. We need more than gimmicks and greenwashing; we need products that address buyers’ challenges and make green buildings and renovations more attractive. Lenders need to offer their best rates and show that they are committed.
Of course, we also need to show consumers where to begin when it comes to making efficiency improvements. The first step is usually an EPC, which will provide homeowners with a roadmap to reduced energy consumption. However, lenders can also play a role by helping to bring to light the long-term, cost-saving benefits of these types of changes.
At the moment, the problem in many cases is not borrowers baulking at the cost of renovations or dismissing the savings from a green mortgage, the issue is that they are not even doing the calculation.
Research by the Intermediary Mortgage Lenders Association found that 43 per cent of borrowers had never heard of a green mortgage. Even where they had, there is likely to be poor understanding: a third of homeowners expected green mortgages to cost more than a typical product.
But there was encouragement too: 13 per cent of intermediaries have seen an increase in green mortgage enquiries since Covid-19, showing how the crisis has brought the green agenda front of mind for many. There is an appetite from homeowners to start taking energy-saving measures and – affordability permitting – scope for more borrowing to fund retrofitting.
Education and calculation
Awareness of green mortgages will inevitably grow as the range of products does. Though IMLA found that 29 per cent of lenders had already launched a green mortgage product or planned to, the industry should do all it can to publicise the options borrowers already have.
It should also work to increase awareness of EPC ratings and the benefits – in terms of energy savings and property values – of improving it.
EPC ratings are held on a government register. Anyone can search the rating of properties – whether they are a prospective buyer or neighbour with a similar property who wants to see what is possible. There is also plenty of information on the key areas of energy inefficiency and the costs of addressing these.
Advisers require support and guidance from the industry at large to encourage clients to use these tools, and ensure their clients’ details are added to the register. As, again, buyers cannot make informed choices about whether an energy-efficient upgrade is affordable and worth it if they do not have any basis on which to do the calculation.
