Written by Jonathan Stinton, Head of Intermediary Relationship, Coventry for Intermediaries
The cost of living crisis is front and centre for borrowers, brokers and lenders alike in today’s mortgage market. Keeping competitive, supporting customers and helping them navigate a higher rate world are all immediate priorities. But while we focus on addressing the here and now, there is a looming challenge that demands our attention – climate change.
The government is committed to reaching net zero by 2050 to reduce the UK’s impact on the environment and strive for a more sustainable future. Housing has a central role to play.
More than a quarter (26%) of Britain’s carbon emissions stem from household energy use, according to the ONS1, and it’s often quoted we have some of the leakiest housing stock in Europe. As the threat of climate change grows, ‘going green’ is only going to become a more important objective for our sector, so it’s time we all recognise our own role in shaping a sustainable future. For brokers, this will mean staying informed on how to guide clients towards greener and more sustainable living options.
Barriers to making energy-efficient changes
Despite the increasingly visible effects of climate change, action to improve the standard of the UK’s housing stock has often been held back by a number of barriers.
First, a cohesive strategy among stakeholders has been lacking. Government policies have sometimes seen rollbacks rather than advancements.
A major knowledge gap has left homeowners and homebuyers in the dark too. Our recent report, Beyond the Bricks: What does a green housing market really look like?, has revealed that very few homeowners (7%) and landlords (6%) know how to accurately gauge the carbon footprint of their properties2. Meanwhile, large numbers of first time buyers are still unaware of sustainable financial products available to them. If these options are not explained well, some buyers might choose to postpone making improvements and miss out on opportunities to make their homes more efficient.
Even when green solutions are considered, there are often steep upfront costs to implement these changes which deter homeowners. The cost of living crisis, from higher mortgage rates to bigger energy bills, has reduced monthly budgets and previously prevented home improvements from being on many homeowners’ priority lists.
Together, these factors mean the housing sector’s emissions crisis has somehow avoided action and been left largely unaddressed. Yet, there are signs that stakeholders in the housing market may soon be prompted to take action.
Growing demand for sustainability
As climate change becomes a reality rather than a distant problem, more people are seeking to live sustainable lifestyles and do their part to reduce their impact on the environment.
At the same time, driven by the urgent need to reduce high energy costs, some homeowners are increasingly looking at how energy efficiency improvements can lower their utility bills. Our research shows that homeowners and landlords are now prioritising their property’s carbon footprint, with 90% and 92% respectively having already made green home improvements3.
It’s a trend that is particularly evident amongst the younger generation of homeowners and future first time buyers. Nearly all homeowners aged 18-24 say they plan to make energy efficiency improvements over the coming year4, according to our research.
The calls for sustainable living are becoming harder to ignore. To keep pace and retain clients, the mortgage industry must urgently align itself with the green agenda.
What does the future hold for green in the mortgage industry?
The 2050 government target for net zero remains one of our most important environmental benchmarks within the housing industry. Building well-insulated, energy efficient new builds will be one part of reaching this goal, and the 2025 Future Homes Standards may require homebuilders to use higher quality materials, forcing down emissions from brand new homes.
However, 80% of the UK’s estimated housing stock in 2050, the target year for net zero, has already been built today5. Meanwhile, much of Britain’s existing housing remains insufficiently insulated compared to anywhere else in Europe6. Bringing older properties up to a better standard will have an even bigger impact on helping the UK to reach net zero.
Government will have a part to play here – an overhaul of the current EPC rating system, often accused of being just a desktop exercise, is simply a matter of time – but the mortgage market for sustainable financial products is also evolving to meet growing demand. It is positive to see lenders introducing new and innovative products into the green mortgage space. This includes incentives for borrowers investing in energy efficient home improvements.
For brokers though, the priority should be to try and get ahead of the curve, making sure they keep on top of all the new green options launching in the mortgage market.
Brokers, especially those focused on targeting the valuable first time buyer market, should look to position themselves ahead of this trend to appeal to younger generations and build new relationships with clients that could last a lifetime. Improving awareness and being able to signpost important information on green products will be critical if they are to maintain and develop relationships with clients, as the green agenda moves further into the spotlight.
