Are brokers doing enough with green mortgage products?

The mortgage profession and the government must unite to help transform British homes to more energy efficient housing stock, a leading industry executive has urged.

Ben Thompson, deputy CEO at Mortgage Advice Bureau (MAB), made his rallying call following research from the intermediary brand detailing the awareness of prospective homeowners of the need to improve housing stock.

“It’s essential that both the mortgage industry and the government work together closely to drive this transition,” said Thompson (pictured left). “The UK’s housing stock remains notably inefficient compared to European standards, and addressing this challenge is crucial for our path to net zero.”

MAB surveyed over 1,000 people looking to buy in the next two years – the average amount they expect to spend renovating  properties is just over £35,500. Notably, 39% plan to spend more still.

Some 36% of potential homebuyers consider a higher EPC (energy performance certificate) rating important, and 20% of would-be buyers plan to install solar panels in their properties - 18% want to spend on new insulation. 

MAB believes the government and financial institutions need to collaborate on solutions that support homeowners to make financially viable renovations, such as incentives, subsidies, or innovative financing options.

Referencing the company’s findings, Thompson said: “The strong interest in energy efficiency upgrades among homebuyers highlights their commitment to retrofitting properties for a greener future. However, to realise these ambitions, we must provide robust support and practical solutions.

“By enhancing the appeal of green mortgages - through increased borrowing limits, lower rates, or cashback incentives - we can significantly accelerate the shift towards a more sustainable and environmentally friendly housing market.”

How many green mortgage products are there in the UK?

Green mortgages have grown from four products in 2019 to over 60 in 2024 in the UK, according to the Green Finance Institute, an independent adviser to the government. Yet Richard Campo, head of growth at mortgage and insurance practice Heron Financial, believes that brokers aren’t doing enough to educate their clients.

“Most brokers will be vaguely aware of an EPC but may not be aware that all major lenders are now looking at pulling this data into their affordability models and AIPs (agreements in principle) so this could positively or negatively affect the loan on offer in the very near future,” said Campo (pictured second from left).

“We see this already when Danske bank will lend more to clients with an A or B rated property. We’ve seen Virgin’s cash back product in this area, on top of other incentives already available from other lenders like Nationwide’s 0% loan and cash back from the likes of Barclays and Halifax.

“The industry is going this way, its undeniable. If you aren’t factoring in the total cost and benefits to your client and understanding the incentives on offer, you simply aren’t doing your job properly anymore.”

He added: “This is very much an education piece and brokers are missing a trick if they aren’t having these conversations with clients. Many lenders like Barclays and Halifax offer free money to get this done. It’s just lazy to not look at this area.”

Campo insisted that with national and local grants already available towards the cost of retrofitting a property, it is often less expensive than many people believe it to be.  

Read more: Skipton Group calls on government to help landlords meet EPC targets

How important are EPCs to buyers?

Broker Joela Jenvey, from Nurture FS, recently qualified as a retrofit assessor and believes that when making an offer on a property, EPCs are now as important to buyers as the length of term left on leasehold properties.

“There is a huge focus on improving the energy efficiency of the property and ways to make the dwelling cheaper to run and a more comfortable place to be,” said Jenvey (pictured second from right). “A high proportion of my home buyers and landlords are instructing level two or three surveys and using the findings to re-negotiate the purchase price in this tricky market, which still hasn’t quite re-adjusted after the massive house price inflation of 2021 and 2022. 

“This makes more money available to improve the property’s energy efficiency. I have seen clients holding back existing capital or raising between £20,000 to £50,000 to make these improvements. If it’s improving the overall standard, value, and re-saleability of your home it is worth making the investment in the long run.”

Michelle Lawson, mortgage adviser and director at Lawson Financial pointed out that renovation costs have increased hugely, and she makes sure her clients are aware.

“People are underestimating, so I make sure applicants have at least one quote before capital raising and also budget a contingency,” said Lawson (pictured right). “I like to ensure that they have some rainy day money left over for unexpected works. Adding costs into the mortgage is the best option - sadly, so many people use credit cards and loans for the works and then try and consolidate these later. However, this is more disadvantageous than borrowing for works from the lender at the outset.

“EPC assessing needs to be brought more up to date and be more reliable. We have had circumstances where borrowers have an expired EPC and a new EPC is lower rated than before although improvements have been made.”

Buyers are not generally thinking about renovations at the time of a purchase, unless a property is particularly in need of modernisation, said Helen MacKenzie, consultant at MacKenzie Mortgages. But she does discuss green mortgages with them.

“For most of them, it’s a longer term plan,” she noted. “More clients are likely to apply for additional borrowing with their current lender, or remortgage in the future.”

Meanwhile, Serena Smith, mortgage and protection specialist at Mortgages with Serena, who mostly works with first-time buyers, said her clients don’t mention making energy saving improvements – but, she brings up the pros and cons of a property’s EPC rating.

“The only renovation queries I have had have been purely for the clients’ aesthetic goals or to improve their living experience,” said Smith. “Some may involve new boilers, radiators, windows but they never specifically mention anything EPC or eco-related. I feel more education needs to done in this area by brokers by way of their social media, for their clients to learn.”