With no regulation in place to enforce the mortgage market to acknowledge this, some lenders have taken the initiative and reacted to the issue by offering incentivised mortgages, however efforts are not equal across the board.
So, this week, Mortgage Solutions is asking: Do you agree with Mark Carney that the financial market is ahead of the government when it comes to climate change?
What Carney is saying is that investors – primarily hedge funds, not necessarily consumers – are addressing the climate shock we’ll be faced with.
We’re on a train which it’s going in one direction and the only argument is how far is that cliff edge? So, most people are looking to the future and asking where will we see growth and less risk?
It’s sensible for investors to ask companies about their green credentials, that’s within reason. But in terms of consumer products, especially with green mortgages it’s hard to see where this is going to come from.
It’s fair enough to say we need green mortgages and I think there is a mechanism which can allow all mortgages to be green, by encouraging energy efficient improvements for example. A few lenders are already doing this, but it is only a couple.
The government has a role to play but I think we are quite slow in creating these products and encouraging consumers to take them up.
The government is doing the right thing by encouraging where they can and not being too forceful with regulation. As a government, they’re damned if they do too much.
It’s up to the industry to make these changes and incentivise people to move in that direction.
It’s estimated that 17 million homes in the UK need retrofitting so there can’t be blanket action against that, just small changes to encourage people to move forward. So, Mark Carney is right in saying the market is doing it and legislation may eventually follow.
You’d probably have to have been living under a rock not to have been aware that consumers are becoming increasingly aware and concerned about the impact of climate change.
Mortgage lenders have addressed the green aspirations of borrowers for many years, Norwich & Peterborough Building Society offering a range of deals that promised to offset the carbon footprint for example.
Ecology BS remains at the forefront and offers an alternative outlet for anyone looking to fund environmentally friendly purchases or improvements.
More recently we’ve seen Barclays showcase the energy efficiency benefits of new build properties with its green mortgages, Kensington develop its eKo mortgage and Saffron BS join the fray with its Retro Fit mortgage incentivising improvements with a better rate.
There’s therefore a desire from mortgage lenders to look ahead and meet the changing demands of borrowers. We no doubt have some way to go but this spirit of innovation will help deliver the practical financing options needed to complement the aims of individuals and government.
Governments have long made the right noises about the need to make improvements to our energy efficiency but have not always found the answer to how best to practically achieve the necessary change.
The UK has a lot of housing stock that is extremely desirable but not always blessed with the energy efficiency of more modern property.
The Energy Performance Certificate at least helps to highlight where improvements could be made but many of these improvements are expensive and will take time to recoup the investment.
This is where home financing options will be critical in helping homeowners make the changes affordable.
The UK is bound by statute to become a net zero carbon emission economy in just 30 years’ time. Which is by anybody’s reckoning no mean feat.
Carney, in his new role as a UN special envoy, as usual has been erudite and concise with his analysis of the challenge faced; needing to move our whole economic model to a more sustainable and environmentally aware approach.
The government has been committed and clear about the need for change.
However, I believe Carney is correct that the financial market is moving faster towards pushing solutions and this goal, whereas the government seems to offer few details on how the journey should be made.
This might not be a bad thing though, the markets may well know best in this instance.
The financial markets know this challenge needs to be faced and are and will increasingly factor in this new vector.
Crucial to good analysis of this new measure of value will be accurate data. Already we are seeing corporates making some climate related financial disclosures, which is a real success for the financial markets.
However, if this is going to move forward in a meaningful way this must become standardised, simple to rate and a mandatory return. Whether this comes via the financial markets or government first is presently moot.