The Intermediary – January 2025 - Flipbook - Page 7
RESIDENTIAL
Opinion
Game on for
lenders and the
green agenda
2
024 was an important
year for green finance
– we saw the Financial
Conduct Authority (FCA)
publish its long-awaited
rules on greenwashing
on 31st May, and while its remit talks
predominantly to the investment
industry, there are important
considerations for the mortgage
market, too.
Just over a year earlier, David Geale,
director of retail banking at the FCA,
delivered a speech at the London
Institute of Banking & Finance (LIBF)
mortgage conference. In it, he said
that green mortgages have a growing
role to play in decarbonising the UK’s
housing stock, by helping borrowers
to improve the energy efficiency of
their homes. He called it “a systemic
issue” and was very clear that every
part of the housing value chain has
a role to play – including mortgage
lenders and brokers.
Lenders risk missing their
decarbonisation targets if they don’t
evolve their support for homeowners
to enhance energy efficiency – one
of several reasons why brokers can
expect to see an increase in green
mortgage products and innovation.
Geale said brokers have a “key role to
play” in helping borrowers navigate
a complex and nuanced landscape,
and he noted “various Consumer Duty
considerations for [environmental,
social, and governance (ESG)]
products centred around suitability.”
“The more specific a consumer is
about their requirements, the more
specific a broker will need to be in the
advice they give to them,” he added.
A year later, the Green Finance
Institute (GFI) launched its Certificate
in Green Mortgages training course,
accredited by LIBF and designed for
those across the mortgage advice and
lending sector looking to increase
their understanding of green
home finance.
The UK’s 29 million homes
constitute the oldest housing stock
in Europe, with almost a quarter
of the UK’s total carbon emissions
coming from buildings. According
to the Climate Change Commiee,
it will take an eyewatering
£250bn of investment to upgrade
the UK’s homes to meet net zero
commitments by 2050.
The onus on lenders is very clear
and, indeed, the market has seen
significant growth over the past five
years. According to the GFI, the green
mortgage market has grown from four
products in 2019 to 61 in 2024.
New twist
Now, Halifax – part of Lloyds Banking
Group and therefore the biggest
mortgage lender in the country – has
come out with a twist on the green
mortgage. In December, the lender
announced it will use a property’s
Energy Performance Certificate (EPC)
rating in its affordability calculations.
“We are now able to beer reflect
the impact of home energy costs, and
some of the financial benefits of more
energy efficient homes,” it said in a
note to brokers.
Amanda Bryden, head of Halifax
Intermediaries, said: “We’re now
factoring in property energy
efficiency, to beer reflect likely
annual energy costs, when looking at
how much customers can borrow[...]
Customers who have a more energy
efficient property, with an EPC rating
of A or B, usually have lower bills.
Therefore, we’ll be able to lend more
to them than if they were buying a
property with a lower rating.”
It’s undoubtedly a big step forward
in the march towards cuing the
MARK BLACKWELL
is COO of CoreLogic UK
UK’s residential housing stock energy
emissions – and by using affordability
as a carrot for borrowers who want
to move up the ladder, as well as get a
foot on it, the lender has potentially
cracked the challenge of spurring
demand for green mortgage finance.
The question now is how energy
performance assessments are made
on a more frequent basis. As the rules
stand, it’s only necessary to renew
an EPC every 10 years – making its
relevance something of an unknown
quantity years down the line
from issue.
On 4th December, the Government
announced that this issue is now
under consultation as part of its
Reforms to the Energy Performance of
Buildings regime.
The consultation includes proposed
reforms to enhance the regime in
five areas:
Updating what EPCs measure
through additional metrics;
Updating when energy certificates
are required by refining the rules for
obtaining EPCs and Display Energy
Certificates;
Managing energy certificate quality;
Improving the accessibility of
building performance data;
Strengthening the quality of air
conditioning inspection reports.
Legislative change takes time,
however, and there are other ways to
skin the cat in the interim – as well as
to strengthen both affordability and
energy efficiency risk management
in future. Algorithmic analysis has
to form part of lenders’ assessments,
and we are already providing those to
many lenders – it’s now game on. ●
January 2025 | The Intermediary
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