Speaking at the Mortgage Solutions New Homes Senate last week, Andy Mason, head of strategic partnerships and housing at Lloyds Banking Group, noted that energy efficiency was “pretty low down the priority order” for buyers, adding that as an industry not enough is done to sell the appeal of sustainable homes.
This was echoed by a new study from NatWest and IHS Markit which found that the energy performance certificate (EPC) rating of a home is rated as an important factor for a home by just 30 per cent of prospective buyers.
Advisers have argued that there is a lot of work to be done across the industry if this is to change in any tangible way.
Industry action needed
Sebastian Riemann, director of Virtus Private Finance, said he has never had a client enquire or seem to care much about the EPC, but noted that it was up to intermediaries to educate clients about how it can have an impact on the price they pay for their mortgage.
He continued: “The key will be an industry-wide push and the involvement of all players including sourcing systems and criteria hubs. The incentives will also need to be significantly higher for it to have a serious impact. The only concern is the reluctance of some to change their approach and as an industry as a whole we are not always the most proactive.”
Dominik Lipnicki, director at Your Mortgage Decisions, said he was unsurprised that energy efficiency is undervalued by many homebuyers, given that so many are used to properties which are poorly insulated with considerable heat loss.
He continued: “This is of course changing, with global warming in the news more than ever before and with the current huge increases in energy prices, buyers will be more focused on the cost of running their potential new home. Will this trump location, school catchment area etc. for most? Probably not.”
Lipnicki added that the government could do more to spur the “green revolution”, for example by reducing stamp duty for homes with the best ratings or introducing a sellers charge for inefficient homes.
Savings aren’t enough to make borrowers care
Pete Mugleston, managing director of OnlineMortgageAdviser, agreed that while it’s not something that particularly resonates with the current crop of buyers, EPC ratings and energy efficiency is likely to come to the forefront in years to come.
He continued: “Although there are green deals on the market for homes with good EPC ratings, the difference is peanuts. We’re talking a small fraction of a percentage, so this alone isn’t enough to make people care about it.”
Mugleston added that another issue around the green mortgages is that they are often targeted at new builds. “To qualify, the property must be on the EPC register so the mortgage lender can verify it, but that doesn’t normally happen until right at the end and the mortgage will have been offered long before then.”
Raising awareness
Carmen Green, mortgage and protection adviser, Xpress Mortgages, acknowledged that until recently EPCs were not particularly something most advisers would think about.
She continued: “The introduction of green mortgages means we as advisers are forced to talk about it with our clients, as we have a potential offering that depends on the EPC rating and energy efficiency of their home, so it’s now part of our conversations.”
Green agreed that education is vital here, with advisers playing a part in encouraging would-be borrowers to look into the EPC rating and sustainability of their homes to understand the potential impact on their finances, and the environment, that would come from a better rating.
Green concluded: “It’s another thing added to the long list of things we have to consider as advisers when making a recommendation, but it’s a very positive step and we are pleased to be able to play a part in raising awareness.”
A nice to have
James McGregor, director at Mesa Financial, agreed it was rare for clients to discuss EPC ratings, and cautioned that it is going to be very difficult to make old properties cost effective to make the relevant changes in order to improve their score.
He continued: “I believe it is essentially a ‘nice to have’ at this point in time as owners save a bit on their mortgage rate as well as some savings on their bills. In the future the design and build of new homes will really push towards this being a big factor as it gets implemented in new homes from the outset.”
