The launch of LENDERS - Researching a new green mortgage scheme

At the end of last week, a new research project, LENDERS, funded by InnovateUK and being run by the UK Green Building Council, The Nationwide Building Society and others, was launched in London. Presentations were made by DECC, UK-GBC, The Nationwide Building Society and BRE

What it was about

LENDERS will build the evidence base for using more accurate estimates of energy bills in mortgage affordability calculations. If successful it could allow higher lending for more efficient properties and eventually lead to a greater link between efficiency and property value.
What does LENDERS stand for? Not sure. It wasn't on a slide, though we were told, it was very hastily suggesting perhaps some unease about it as an engagement tool.

Why it matters

The idea the study is looking into support is very sound. We all know that demanding reduction targets for domestic carbon emissions need to be met (1 million homes need insulating by 2020) and post Paris COP21, drivers to achieve these need establishing. Additionally having cut Green Deal support, the conservative government, is looking for solutions to come from other sectors. With over 1 million (yes that number again) homes being bought a year in the UK, if a mechanism connected with house purchase can be established that facilitates retrofit, the number of homes being improved will significantly increase. And after all, it needs to.

Why it matters to Bristol Green Doors

At Bristol Green Doors we have seen a growing number of our householders are those who have just bought their house. Whether it is couples or individuals, we know they recognise that this is the best opportunity to undertake major energy efficiency works in addition to those typically carried out following purchase. At our events we have also witnessed growing numbers of visitors being people looking to tap into our openers’ experiences to help inform plans for their first home. Indeed, the idea of building societies supporting retrofit is not new. Two of our openers in 2015 xxxxx bought their homes with “Sustainable” mortgages from the Ecology Building Society www.ecology.co.uk/

Given our modus operandi, we attended the event looking to see what opportunities there might be to support this research. The idea is exploring is really important and, should the findings be favourable, it would be great to see it be introduced by a player as significant as the Nationwide (the UK’s second largest mortgage provider).

Key issues arising

The launch was very well attended and, in both the presentations and Q&A following, many important issues were raised. Many of these are summarised below. However it was noticeable and a shame that we didn't hear about the design and structure of the research as I would imagine that Bristol Green Doors and other green open home organisations could contribute to this. Points of note arising are as follows: 

  • Success of the scheme depends on positive outcomes to the three key qustions to be tested: Can we effectively anticipate actual fuel cost from combined EPC & property information?; Is the cost variation enough for a large enough number of properties to justify developing new mortgages?; Can the necessary changes be incorporated into the mortgage process? 
  • Predicting energy consumption requires both accurate and meaningful modelling tools yet the Energy Performance Certificate is almost certainly not fit for purpose
  • Mortgage affordability is currently done on average home energy consumption but as in energy efficient homes bills should be lower, estimates can be inaccurate by £45,000 over 25 years
  • The re-engineering of mortgage process is a complex issue and experience from the Green Deal  tells us that a new type of “product” needs to as simple as possible and "kept in the back room"
  • Competition for a well-meaning scheme may arise from banks offering loans unconnected with retrofit and this is a risk
  • More energy efficient homes could impact on house prices
  • There is no guarantee of public buy in, consumers may not be rational

Personal reflections

Thinking about the event on the way back to Bristol, I was struck by following:

  • I struggle to accept the extent to which government is seeming to leave the decarbonising of homes to others and that their current involvement (stated by DECC on Friday as being regulatory, supporting the Bonfield Review, the supplier obligation and the Warm Home Discount) will be sufficient. We as a country have to get this right and the government can rightfully lead on considering legislation to support schemes such as the oine being researched and nationally implementing better energy literacy education.
  • With average house prices in the South East over twice as much as those in other parts of the UK, but energy prices not reflecting anything like this, what are the implications of this north-south price divide on the developing new mortgage products?
  • The launch gave very little mention to people and more consideration or inclusion is needed.  After all – “Buildings don’t use energy people do”.  A high rating home is no guarantee of low bills. We at Bristol Green Doors know there are very energy efficient homes with “high” bills because the occupants choose to live in a warmer home. Hopefully this is something that can change. lacking from the key testing was finding out whether enough people currently would want a new type of "green" mortgage. There is no point setiing something up and having an unready or unrespoinsive market for it
  • On a connected note, given that mortgages are typically joint decisions between predominantly hetero-sexual couples, it would be good to have seen more women involved in the presentations and discussions. Responding to climate change is not only about technical solutions but recognising the very different personal narratives too.

Conclusion

The LENDERS launch was an interesting and important event to go.  As identified in a previous blog it is essential that incentives around house purchase are introduced to encourage retrofit. The Ecology Building Society have done some excellent work in this area and hopefully this has not been down to numbers as green mortgages must be scaled UP. Government must play an active and apolitical role in supporting take up of new house purchasing mechanisms.  The roles and values of people must not be under-estimated. 

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