Take a different tack on sustainable housing

Change is coming

The mortgage industry is set to transform as sustainability becomes more important to homeowners, lenders, and therefore brokers.

Karina said that energy-efficient homes are not just better for the environment, they can offer significant cost savings to homeowners too and present a viable business opportunity for brokers.

Because of this, we’re beginning to see energy-efficiency being baked into mortgage criteria as running costs play a more important role in property affordability.

Potential regulatory changes could also have a direct impact on your clients’ finances.

Landlord clients might already be aware of the proposal to tighten Minimum Energy Efficiency Standards to an EPC C-rating by 2030, plus the government recently consulted on changing the assessment criteria for EPCs.

But new rules might not only be relevant to landlords. In Scotland, the Heat in Buildings Bill proposes minimum EPC requirements on owner-occupied homes as well as privately rented properties. This doesn’t cover the whole UK but gives us an idea of the direction of travel.

Referral arrangements: There is a potential business case for brokers to form strategic partnerships with retrofit suppliers – you’re not expected to become a retrofit expert.  Just as we already do with conveyancing and surveying, there's potential for referral as long as this is completely transparent and disclosed to the customer.

Boost retention: An increase in energy bills can impact the customer's ability to repay their mortgage. By addressing this, you are showing a commitment to your client’s financial health that can build trust and help retention.

The risks of doing nothing

The risks of ignoring this are stark from a climate and also a financial perspective.

Failing to engage with sustainability could have serious implications for brokers and their clients:

1. Non-compliant properties: With stricter regulations, properties that don’t meet energy standards could become unlettable, harder to shift and potentially more difficult to refinance with lenders under pressure to clean up their mortgage books.
2. Declining property values: Poorly rated homes could lose value as buyers and lenders prioritise energy efficiency, creating a potential devaluation risk. We can already see early premiums on some energy-efficient homes which could increase over the coming years.
3. Rising utility bills: Inefficient properties mean higher running costs, and this could be amplified in the future if utility bills keep rising, impacting household finances and mortgage affordability.
4. Lost competitive advantage: There are few early adopters specialising in ‘green’ mortgage advice, so those who do can strengthen their market position. If you don’t, you’re at risk of falling behind.

How to help clients?

Clients might not ask for ‘green’ mortgages outright, but brokers can lead the way by reframing the conversation. Instead of asking clients if they’re worried about their EPC rating or a property’s carbon emissions, ask if they are worried about rising energy bills.

As Karina pointed out, there is a huge knowledge gap that you are perfectly positioned to fill, and she offered some practical tips:

• Highlight the cost savings: Show how retrofitting can reduce utility bills, often offsetting additional mortgage costs. For example, adding £12,000 to a mortgage to fund energy-efficient improvements will slightly increase monthly repayments. But when you look at the reduction in energy costs, it could deliver significant energy savings, now or in the medium term.
• Discuss the property price premium: Talk to your client about the potential premium on energy-efficient property, explaining how an inefficient property could be more difficult to sell in the future. If a potential buyer is choosing between their home and a similar one that costs half as much to run, they will go for the cheaper one.
• Don’t forget the immediate benefits: Energy-efficient homes are more comfortable year-round, with lower heating and cooling costs and they are less prone to problems, such as damp.