Green Mortgages - are they a busted flush?

Awareness of green mortgages is dipping among buyers, according to new research.

Almost two thirds of mortgage advisers say their clients have not heard of green mortgages and don’t understand them – up from last year’s figure.

The research from Mortgage Advice Bureau shows an uptick in the number of conversations with customers where the topic has NOT come up (16 per cent vs 12 per cent in 2022).

MAB says one of the primary reasons for this is likely the fact that it has been a very turbulent year. It seems that for many advisers, there have simply been too many challenges to focus on going green. 

Advisers admit that it can be a challenge to educate and inform clients on EPC ratings and green mortgages when having to tackle conversations on the cost of living crisis (52 per cent), with retrofitting costs at the forefront of advisers’ minds.

Almost one in five advisers see information overload as a challenge, as it can make it difficult for homebuyers to trust advice given, and one in nine believe conflicting messages make it difficult to educate customers. Some eight per cent also say the government U-turn on the minimum EPC legislation for landlords is a challenge, along with the inaccuracy of EPC ratings (seven per cent).

Despite these challenges, some 22 per cent of advisors admit there needs to be more public awareness and education about the benefits of green mortgages. 

When it comes to what could be done to improve knowledge and accelerate efforts, one in four advisers say the mortgage industry needs to offer more competitive interest rates and incentives for green mortgage products. Meanwhile, a fifth say the industry needs to develop a wider range of green mortgage products tailored to different needs and budgets.

Currently, the vast majority of advisers only offer clients a green mortgage when they know they have, or are looking at, a property that meets the criteria for this product. Despite a lack of discussion on green mortgages, 45 per cent of advisers say there has been noticeable progress in the green mortgage space compared to a year ago.

Ben Thompson, deputy chief executive at Mortgage Advice Bureau, comments: “The past 12 months have seen advisers dealing with numerous challenges. Rising interest rates coupled with the higher cost of living has meant that for many customers, the cost of their mortgage has been front and centre. However, it remains vitally important that advisers keep having these conversations to inform customers if they (and the property they own/are buying) may be eligible for a green mortgage.

“There is also still a lot of progress to be made in this area from an industry point of view, and more to be done to make green mortgages more attractive. This could be innovations that give customers the potential to borrow more, receive a lower interest rate, or by offering other benefits. As the market settles and finds a new normal, green mortgage innovation should be at the very forefront of the industry’s priorities.”

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