Improving the energy efficiency of UK properties will be one of the major challenges the mortgage market faces over the next five years.
Driving meaningful change on this issue will require action from lenders, landlords and consumers.
However, we also need greater clarity from the Government and policymakers — particularly regarding the support they will offer to homeowners, and the wider industry, and a proposed timetable for a raft of expected regulation around this issue.
To date the new Labour Government has confirmed it will be reintroducing mandated targets to improve the energy efficiency of privately-rented homes.
It is proposing a 2030 date to get homes up to an Energy Performance Certificate (EPC) rating of at least C — which will mean around 340,000 a year will need to invest in energy efficiency upgrades. Around 50% of properties in the private tented sector are an EPC of D or worse.
Retrofitting UK homes could make a significant contribution to two of the new Government’s key objectives: driving economic growth and building a greener, more sustainable future.
Looking across both the rented and residential sector, the UK Parliament’s Business, Energy and Industrial Strategy Committee, estimated that around 29 million homes need to be upgraded to low-carbon heating systems by 2050 if the UK is to meet its net zero targets.
Such upgrades are likely to drive economic activity in the UK, but will also require around £250 billion in investment.
To meet this challenge, we must explore innovative ways to finance these retrofit projects.
This will likely involve a combination of public funding, such as homeowner support grants, alongside innovative green mortgage solutions from the lending industry.
At Hinckley & Rugby Building Society, we like to think we are leading the way with our new RetroGreen product.
This offers competitive borrowing rates for customers carrying out energy efficiency improvements, with our very lowest rates for these mortgage products.
Crucially, we’ve also partnered with an independent specialist, Digital Buildings, to provide personalised advice on the work needed, estimated cost to achieve an EPC rating of C or higher, and what this will mean in terms of savings on lower energy bills going forward.
Independent advice like this is essential. There remains a widespread lack of understanding about energy efficiency improvements, from heat pumps and insulation to different types of cladding.
People understandably don’t want to commit significant sums if there is doubt as to the potential future savings.
And there is no one-size-fits-all solution; much depends on the property type, its age, existing energy measures, and, of course, the homeowner’s budget.
This is where expert third parties like Digital Buildings are invaluable. People need to know where to go for trusted advice on the best options for their homes and how the costs and savings add up.
Another critical role these third parties play is in vetting and recommending reputable suppliers and tradespeople to carry out the upgrades.
Over the next decade, we’re likely to see significant numbers of property investors and homeowners retrofitting properties.
What we cannot afford is a “cowboy’s charter,” where unqualified companies perform substandard work that fails to deliver the promised improvements or, worse, devalues the property.
Such scenarios could seriously undermine confidence in this important retrofitting initiative.
Partnering with a trusted third party like Digital Buildings doesn’t just provide peace of mind for buy-to-let investors and homeowners.
From a lender’s perspective, it also ensures that the money lent is being used for its intended purpose.
Retrofitting isn’t a distant plan for the future — it’s already happening now, across, in both the buy-to-let and residential sectors.
The buy-to-let market has contracted in recent years. But at a recent industry event the trade body, UK Finances mentioned one notable trend: larger landlords are increasingly “flipping” properties, selling less energy-efficient homes and reinvesting in properties with higher EPC ratings or those that are cheaper to retrofit to a C rating.
Landlords know that regulation is coming, and serious investors want to get on the front foot when it comes to implementing such changes.
The UK’s housing stock is significantly less energy-efficient than that of most other Western democracies.
Tackling this issue will require coordinated action across the industry, supported by clear and proactive government policies.
Greening our homes won’t just lower the UK’s carbon footprint — it will also deliver warmer, more comfortable homes that are cheaper to run, and more cost effective to rent.
That’s an attractive prospect for both landlords and families alike.
Laura Sneddon is head of mortgage sales and distribution at Hinckley & Rugby for Intermediaries
