As brokers’ higher value purchase business gives way to increasing volumes of lower paid product transfer deals, surfacing new revenue streams is a vital way to stay profitable.
But a lack of awareness of the money-earning opportunity and the perceived barriers to engaging in retrofit conversations is holding many brokers back.
According to green software firm Propflo, the total value of incentives to brokers from energy efficiency improvement suppliers exceeds £2bn, with the potential of a £700 commission per property if a combination of three improvements were installed.
Habito, which has already begun sending targeted marketing about retrofit improvements to all homeowners in its back book with an Energy Performance Certificate of D or less, says the potential earnings should provide brokers with enough of an incentive to pursue the opportunity.
“It depends on a broker’s business model,” said Will Rhind, VP of mortgage advice and growth, Habito. “Some brokers don’t charge for advice and solely rely on procuration fees. £700 is a realistic average proc fee from doing a mortgage so if you look at it that way, you’re doubling the revenue you could potentially earn from a deal.”
Extra revenue isn’t the only benefit to adding retrofit referrals to your business model, adds Rhind. “If a broker can add value, the customer is more likely to return and tell their friends about where they got the advice from.”
Do brokers have to be retrofitting specialists?
“Brokers need to be experts in finance products not the green agenda,” said Luke Loveridge, founder and CEO of Propflo which offers a tool, GreenVal, which allows brokers and homeowners to see what retrofit improvements the property needs, the cost and its benefits.
Retrofit software tools can recommend the work a home needs based on its postcode and the data held against that property. Brokers can white label the tool on their website and email a link to clients with an EPC of D or below to let them know, ahead of an upcoming remortgage or at any point in the mortgage cycle, that improvements can be made to their home to boost its energy efficiency while recommending pre-vetted suppliers to do the work.
If the customer uses any of the suppliers the broker earns a referral fee and wins the opportunity to arrange the finance if needed.
Sell the business case to clients
“Brokers do, however, need a broad awareness of the benefits of energy efficiency improvements so that they can explain the business case to their clients,” said Loveridge.
Loveridge says it is not just about the return on investment – how long it will take for the saving in energy bills take to repay the cost spent on the improvement. There is also the expectation that post-improvements the property will be worth more or be more capable of defending its value.
There are also physical benefits such as being warmer in winter and cooler in summer and the opportunity to feel more secure in retirement or family life knowing that energy bills will remain at a stable level.
Incentives must improve
Rhind would like lenders to improve their green propositions to incentivise greater interest from both brokers and borrowers.
The chance to get £250 cash back on a green mortgage does little to encourage a borrower to improve their EPC rating or leave them with a lasting impression that their broker has offered value in helping them to improve their energy efficiency, says Rhind. He wants to see a higher proc fee paid for a green mortgage or retrofitting.
“If the value of the property is improved by retrofitting then that makes the lender’s whole back book lower risk which is a benefit for them,” he said.
He also wants to see innovation for high loan to value properties that need retrofit work. “If another valuation is done after the work and the value has gone up by, for example by £60,000, they could be switched to a lower LTV with a lower rate no questions asked.”
