The mortgage industry must step up on green products – Bawa

For homeowners, there has been the pain of rising energy bills, with residents of older, less efficient homes seeing the cost in pounds and pence. Meanwhile, both this and previous governments have outlined various proposals aimed at improving efficiency standards as part of the push towards reaching net zero status. 

Buyers are not only paying closer attention to the efficiency rating of the homes they visit, but are willing to pay a premium for the top performers – around 3.4% according to analysis by Oxford Economics.

And while the mortgage market has woken up to the potential for delivering products aligned with this green drive, I’d argue that such innovation remains in its early stages. Borrowers want and expect more progress on these products – the industry needs to step up and deliver. 

What are borrowers looking for? 

Advisers are well aware of the growing interest in openly environmentally friendly products. Indeed, some are making it their specialism, their chosen way of connecting with a whole cohort of borrowers. 

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We have seen that ourselves with one of our newest appointed representative (AR) firms, Lenderhive, which launched formally to the market recently. Lenderhive’s model is based on making the most of digital tools to support clients who are keen to secure mortgages that deliver discounts to properties with a higher energy-efficiency rating. 

Having joined the Open Property Data Association (OPDA), Lenderhive is helping make the process more transparent for borrowers, ensuring the decisions they make are as informed as possible. It’s a great example of how the industry is responding to the clear demand of our customers, putting environmental considerations in greater focus as part of the borrowing journey. 

It’s also important to note a more explicit focus on ethics from some borrowers. Paul Waterfall, director of our AR firm WR Ethical, has reported a notable portion of the adviser’s customer base expressing a preference for working with lenders who behave ethically, to the point they are comfortable paying extra money each month in order to deal with more ethical providers. 

There’s a clear message here for providers and advisers alike. While cost will always be a primary factor in product selection, doing the ‘right’ thing – whether environmentally or ethically – is a big driver and so must be addressed in client conversations. 

Looking for more options 

Recent years have seen great improvement in the availability of mortgages that are somewhat ‘green’ in nature.

However, there remains much room for improvement. It’s not just about numbers – though the greater the competition, the better the deals will end up being. What we also need to see is more innovation. It’s one thing to offer discounts for properties that are already at the highest levels of efficiency, but we also need a greater range of options that make it easier for homeowners to improve the efficiency of their homes. 

Beyond the products themselves, the industry also needs to do a better job of educating borrowers about green mortgages and the potential benefits they can deliver. We need to tackle misconceptions and help borrowers understand the financial and environmental benefits such products can deliver.

With the younger generation being much more environmentally aware and motivated in their decision-making, we have to demonstrate that this industry is in sync with those concerns. Progress has been made, but there’s lots more to do. 

The direction of travel 

There was a time when the concept of a ‘green’ mortgage would have raised eyebrows, but by now, they have become a more consistent part of a broker’s offering. With energy bills and climate change a concern for a significant number of borrowers, there has never been such a focus on the efficiency of our homes. 

As advisers, this presents a tremendous opportunity for building lasting relationships with new homebuyers, who are often completely unaware of the growing suite of products that reward efficient homes. However, we also need to be advocates for further innovation, pushing lenders to go further in their product design and fill the gaps.

We’ve made a good start, but it is only a start. Borrowers are relying on far greater progress on green products if we are to match their aspirations.