At the turn of the New Year, there was greater focus on eco-friendliness than ever before. Warnings of melting ice caps and global floods as the planet heats up were front page news as calls for us to be more ‘green’ echoed round the UK.
While weekly recycling, boiling only the required amount of water in a kettle and wearing a jumper indoors can all help to slow down global warming, it seems that consumers can be even greener – especially when it comes to financial planning and mortgages. The current raft of ‘green’ mortgages available on the market allows potential homeowners to borrow more money for a mortgage as energy bills will be lower.
Raising the green profile
But how many brokers, or indeed consumers, are aware that green mortgages exist? According to research carried out by Penrose Financial, only 19 per cent of mortgage brokers are aware that lenders offer mortgages designed to be more eco-friendly. Admittedly, only a handful of lenders have dared to dip a toe in the ‘green’ water. Co-operative Bank, Norwich & Peterborough (N&P) BS and the Ecology BS have all jumped on board in a bid to make the mortgage world more eco-friendly.
Claire Burston, partner at Penrose Financial and head of consumer finance, says: “Our research shows that the market for these types of green products is clearly in its infancy, but highlights that they could be a growth area in the lending field going forward as the public, along with the government, becomes more actively involved in trying to protect the environment. But for the green market to really take off, brokers believe the government will have to work with lenders to offer an incentive.”
Nick Gardner, director at Chase de Vere Mortgage Management, agrees that knowledge of green mortgages is limited, but admits it is a growing area of the market. However, he stresses that getting the right mortgage product for your client is just as crucial. He says: “Green mortgages are a small but growing part of the market, but people need to be a little careful and be sure they don’t get hoodwinked by a gimmicky product.
“Co-operative Bank, for example, makes a donation to Climatecare, a charity that combats global warming by investing in projects to offset carbon emissions. But in most cases it may be more sensible to take a cheaper mortgage and make their own donations to environmentally-friendly charities.”
Green working practices
While it is always best advice for consumers to shop around, lenders are determined to make eco-friendliness part of its working practice. For example, N&P rang in 2007 with the announcement that it was to become the first building society to be ‘carbon neutral’ and achieve the CarbonNeutral quality mark. The announcement confirms the firm’s dedication to the green cause.
Matthew Bullock, chief executive at N&P, says: “We subscribe to the view that doing nothing is not an option, and that we need, in our working lives and at home with our families, to make an effort to reduce emissions which cause climate change. The Chancellor’s pre-Budget statement regarding zero carbon homes was a positive step. Housing contributes more emissions to global warming than cars. That is why we try to raise awareness of how homes can be made more energy efficient.”
Ecology BS is also firm in its stance on being more environmentally friendly. Its judges all applications against its unique lending criteria. It starts by assessing the environmental impact of the project in terms of energy use, pollution and saving resources. This includes properties where new and less conventional ideas are incorporated, such as earth sheltering and breathing walls and includes features such as easily recyclable materials, natural paints and renewable energy systems such as solar panels and wind turbines.
Gardner says: “The Ecology is very much a ‘dark green’ lender, as it will only lend on properties that meet its ethical criteria, such as old stone buildings. This is great if you’re embarking on such a project as many mainstream lenders won’t touch that type of building. Ecology fills a genuine ethical niche.”
EPCs
With the introduction of Energy Performance Certificates (EPCs) set to become a feature of the market in June, it seems a focus on ‘greener’ lending could be the way forward.
However, Rob Clifford, managing director at Mortgage Force, says while the market is likely to see more onus placed on green mortgages, products of this nature would never become mainstream.
“Awareness of green mortgages is scant, but that said, it accounts for a tiny minority of the market. As they become more relevant, advisers will become more familiar with them. However, I doubt they will ever become a mainstream product, but will instead remain a niche proposition. But there’s no doubt the more discerning client will be looking to see growth in this area.”
Looking ahead, the market is likely to become more aware of environmental issues in 2007, particularly with the introduction of EPCs in June. However, there remains a lot for lenders, government and indeed, brokers to do to help raise awareness of green mortgages.
