As the threats posed by climate change become more apparent, mortgage lenders have taken steps to help nudge property owners to reduce emissions but 2023 could be the year that lenders go even further.
‘Green mortgages’ have been on the rise, and although the ‘green’ status of a mortgage is self-determined, common features generally include offering a lower interest rate for properties with a better energy efficiency rating.
According to Moneyfacts there are currently 533 ‘green’ mortgage products (as labelled by lenders) available on the market from both high street and specialist lenders.
Many in the industry believe that this will be the year that mortgage lenders will go the extra mile to help buyers minimise the emissions associated with their property.
According to the United Nations, the building sector accounts for 38 per cent of all energy-related carbon dioxide emissions globally.
While in the UK, the Department for Business, Energy and Industrial Strategy estimate that the residential sector accounts for nearly 21 per cent of carbon dioxide emissions.
Emitwise, a climate tech specialist which helps companies reduce and control their carbon footprint, has said in order to achieve building stock that is net zero by 2050, emissions in the sector will have to be halved by 2030.
Speaking to FTAdviser, Mortgage Climate Action Group co-founder, Richard Merrett said in the past few months there have been “a few decent lender initiatives” to help achieve this.
High street lenders such as Halifax and Natwest have introduced tools to help homeowners and businesses reduce their property related emissions while specialist lenders like Aldermore Bank have published useful support guides for mortgage advisers and customers.
Other lenders like Skipton Building Society have introduced a free EPC report for its mortgage holders which allows them to see what improvements they can make to improve their property’s energy efficiency.
Merrett noted that steps like this are even more important in the current climate as they can help homeowners reduce their energy bills in the long-term.
He also pointed out that it is relatively easy to “shift the dial” when it comes to a property's EPC rating.
"I've seen firsthand quite a few instances where someone has been a couple of points away from moving from one band into another and it might be that just putting in LED light bulbs, or putting an energy efficient jacket around the boiler, actually gives you the requisite score to nudge it up,” Merrett said.
“It’s highly possible that if someone's done work to a property since the last EPC was done that they have improved the rating,” Merrett added.
Another popular approach taken by lenders has been to offer cashback for A or B EPC rated homes or to give cash towards energy efficiency improvements - like installing a heat pump or insulation.