The mortgage industry has a role to play in combatting climate change and reducing people's energy bills, yet the vast majority of borrowers do not understand green mortgage products, research suggests.
A survey from the Mortgage Advice Bureau found a distinct lack of knowledge about green mortgages, with two-thirds (63 per cent) of the 458 mortgage advisers polled saying their clients have never heard of the term ‘green mortgage’.
Four out of five (83 per cent) of the advisers polled in September said their clients had no understanding of green mortgages while 14 per cent said they partially understood them.
Yet, the property industry's role in tackling climate risks is growing, as the green agenda intensifies and the government has committed to a goal of being Net Zero by 2050.
About a fifth of emissions come from buildings as nearly two thirds of owner-occupied homes have an EPC rating of below C.
The industry has a lot to do to decarbonise homes and increase consumer understanding of green mortgages and EPC ratings.There is work to be done to reduce the carbon emissions of properties and green mortgages are one way to incentivise homeowners to boost their property’s EPC rating, said Ben Thompson, deputy CEO at the Mortgage Advice Bureau.
He said: “While the country’s Net Zero targets may seem far away, the reality is we are hurtling towards them at a faster rate than many realise.
"We no longer have the luxury of time, and the industry has a lot to do to not only decarbonise homes but increase consumer understanding of green mortgages and EPC ratings.
"Despite the number of green mortgage products coming to market, there is a considerable disconnect between their benefits and the consumer knowledge surrounding them."
As well as a lack of client understanding, brokers often do not offer the products, the MAB found.
A mere 30 per cent of advisers told the broker network they actively proposed green mortgage products to their customers.
About a quarter, 23 per cent, said green mortgage products were fine in theory but not always suitable, and suitability was the top priority for the vast majority of those polled.
However, as the number of green products available has grown, the topic of green mortgages has been raised more often in adviser-client conversations.
The MAB said 88 per cent of advisers had told it the topic of green mortgages had come up in conversation in the past 12 months, with 84 per cent saying the topic had been prompted by them, and 3 per cent saying it had been prompted by their clients.
A minority of advisers, 8 per cent, admitted they needed to upskill in their knowledge and understanding of green mortgages.
Stepping up
The MAB also questioned advisers on where they thought responsibility lay in helping educate consumers about green mortgages and EPC ratings.
Two thirds of advisers thought it was the responsibility of mortgage brokers, while a further third pointed to the government.
Responsibility to educate consumers about green mortgages and EPC ratings (multiple answers possible) | Percentage |
Mortgage brokers | 67% |
The government | 30% |
The media | 25% |
Consumer champions such as Money Saving Expert and Which? | 21% |
Lenders | 18% |
Financial bodies such as the FCA, IFS, UK Finance have a responsibility | 14% |
Mortgage trade bodies | 10% |
Independent organisations such as the Green Finance Institute | 9% |
carmen.reichman@ft.com
