Go back a couple of years and the notion of ‘being green’ in a UK mortgage or housing market context was very slight. Of course, we were all aware of the Energy Performance Certificate (EPC) but its importance, certainly within a purchase decision, was negligible, to say the least.
Consumers got an EPC within their pack, probably gave it a cursory glance, perhaps raised an eyebrow if the energy efficiency level was low, and then completely discounted it in terms of whether or not they put an offer in on the property.
While I wouldn’t say this decisioning has been completely flipped on its head by recent events and debate around energy efficiency, what I would say is that we’re all (at the very least) much more aware of what’s going on, what the EPC tells us, what might be coming over the horizon in terms of upping those levels, and what may be required of us all to move things forward.
The green society agenda
One of the major reasons why we held a full session on the ‘Green mortgage agenda’ at our recent Annual Conference was because of its growing importance and, in our opinion, this debate is going to be a mainstay of our market for many, many years to come – probably forever.
The reasons for this are fairly obvious in terms of the Government’s commitment to net-zero carbon emissions, and of course one of the biggest sources of that carbon is UK property.
That’s going to require some sizeable changes in UK society as a whole, but more specifically in our sector, especially from advisers who are going to be looking after clients for whom the energy efficiency rating of their homes/properties becomes ever more important.
At our conference we heard from LBG’s Andy Mason and 3mc’s Doug Hall, and both offered insight into both the adviser and lender position within the green agenda. Lest we forget, that lenders are under significant pressure to ensure their back book of properties on which they lend are up to a minimum of EPC level C by 2030, so it’s not just landlords or homeowners who are going to have to meet such requirements.
However, at present, we’re still a little up in the air in terms of what levels will be set and what dates will need to be met. As you’ll know, even the PRS levels of Level C by end of 2025 for new tenancies, and the end of 2028 for existing tenancies aren’t set in stone and are still being consulted on, however, it would be surprising if this doesn’t become law.
Where PRS leads, owner-occupation will follow
And, where the PRS leads, it’s likely that owner-occupation will follow because, when married up with that lender back-book responsibility, you can clearly see the need for something similar.
So, what does this mean for advisers? Well, as a start, landlord borrowers need to be made aware of what is coming. Many are already, but as recent research tends to show, many are not.
Clearly, advisers can help here. One thing you might not be aware of is the ability to check the EPC level of most properties by visiting: gov.uk/find-energy-certificate.
How useful might this be for your landlord borrowers, particularly those who are coming up for a remortgage, or indeed, simply as a service to them? For each entry on the site it also gives ideas on how the property’s energy performance can be improved/how it can improve its EPC level, with typical costings for each recommendation – such as solar water heating or panels or energy-efficient lightbulbs – and what a typical yearly saving might be.
For those properties which have levels to improve, this could be invaluable information for the owner, potentially changing their remortgage needs in order to secure extra funding to have that work carried out.
With a growing number of ‘green mortgages’ it will also be relevant for you as the adviser, helping you ascertain which lenders/products might be appropriate for these needs.
That is simply a starting point and one that I suspect will be greatly appreciated as we move forward, by all borrowers.
Jo Carrasco is Business Partnerships Director at Stonebridge