A panel of industry experts has called for action to plug gaps in the green finance and mortgage market, particularly when it comes to support with retrofitting.
During a Propflo Green Homes webinar which took place last week, hosted by Pam Barbato, founder of Action Net Zero, William Rhind, VP of mortgage advice and growth at Habito, detailed the various options currently available to borrowers, including cashback deals and larger loan sizes for new-builds.
However, Rhind asked: “Free, cheap money is a great thing, right? But are these products really hitting the mark? Not really, in my opinion.”
He added that various lenders had recognised that new-build, energy efficient properties are cheaper to run, therefore opting to lend more.
However, Rhind said: “If a customer were to improve the value of their property, that is going to be beneficial for a lender’s back book.
“If it puts them into a lower loan-to-value [LTV] banding, why can’t they switch onto that deal with no early repayment charges [ERCs].”
He added: “Why aren’t all lenders offering more borrowing if a property is cheaper to run?”
However, Rachel Buxton, housing sustainability manager at Lloyds Banking Group, said that while it might sound simple, the reality is far more complex from a lender’s point of view.
She said: “EPC-linked affordability is the immediate answer most brokers are thinking about, but we’re carefully considering the right options before we make any decisions.”
Buxton added that many of the green products currently in the market have been focused around new business.
She said: “The big gap at the moment is on retrofitting and the refinance space…that’s essential for delivering the goals we’ve got for getting to net zero.
“It’s more challenging for lenders as a whole – we all need to get better and really drive innovation in this space.”
Luke Loveridge, founder and CEO of Propflo, said: “
Rhind added that the market was not incentivising brokers enough, particularly where green mortgages have added a layer of complexity to their processes.
He suggested the market consider increased procuration fees for helping customers finance things like retrofits, and that Government could introduce grants – like those seen for consumers – to help brokers invest in elements such as green technology.
However, Rachel Hunnisett, associate director at the Green Finance Institute, pointed out that green mortgages, funded by margin compression, are currently the biggest loss-leaders on lenders’ books.
She added that, unless this system changes, “the market simply won’t scale.”
Hunnisett went on to question whether the market should be incentivising brokers to push for green finance options for their clients at all.
She said: “It’s not the job of the broker to go and champion green, or say ‘I will only do your mortgage if you get a heat pump’, that would be an awful outcome.
“What we need instead is long-term policy certainty from the Government, a mixture of carrots and sticks in terms of legislation that support customers to decarbonise, and give them a long-term roadmap on the benefits.
“We can over-bake the academic side in this market, talking about return on investment or payback period.
“Actually, what people want is warm homes that are nice to be in. It’s not understating that, to talk about green homes and sustainability.”
