Why mortgage brokers are vital in helping homebuyers go green

We delve into the reasons why mortgage brokers are essential partners for homebuyers aspiring to make eco-conscious property choices, and how brokers can help pave the way for a greener future.

As more and more homebuyers prioritise eco-friendly principles and sustainable living, the role of mortgage brokers has taken on new significance - their expertise and guidance has become vital in navigating the complexities of green home financing. 

From understanding the intricacies of energy-efficient mortgages to identifying incentives for environmentally-friendly upgrades, mortgage brokers are invaluable in the transition to greener homes across the UK.

Here's why...

Why is energy efficiency important to homebuyers?

With many of us transitioning our life choices to reflect our care for the environment and the future of our world, installing green technology in our homes is a growing priority. 

It's not just the planet that benefits - making a property energy efficient can create thermal comfort, better air quality, financial stability and reduce household running costs. A small solar PV and battery system, for example, creates benefits of £15,890 over its lifetime. Green homes are now estimated to sell for up to 15% more than their ‘brown’ counterparts, making them a more attractive investment for buyers and upgrades appealing to renovators.

For homebuyers, a more energy efficient home can now attract mortgage lender incentives, as some lenders are now encouraging energy efficiency through increased affordability and more flexible lending criteria. For example, the average 5 year fixed rate mortgage could come with a saving of around £2,892 when used to purchase a greener property.

Why should energy efficiency be important to mortgage brokers?

For brokers, considering energy efficiency offers a better customer experience - it can increase customer retention by considering customer needs holistically, and getting customers the best mortgage deal for their long term needs. 

Brokers who are early adopters of green deals will be the first to benefit, as they are able to cater to customers’ changing behaviours and preferences.

As a broker, being seen as a subject matter expert allows you to give customers the advice they are looking for, as more homeowners seek greener properties and expect certain sustainable measures like EV chargers to already be installed. Adding another level of value to customers helps to build deeper relationships, and demonstrate your own green credentials in a world where the value of this continues to grow.

The crucial role of brokers and green mortgages

In 2022, the UK imported energy worth £117bn, up from £48bn in 2019, and it’s estimated that cold homes cost the NHS £540m per year. A report by LSE predicted that the cost of climate change to the UK will increase from 1.1% GDP to 3.3% by 2050, and 7.4% by the end of the century. That’s an increase of £157bn per year!

To get to net zero and save on energy costs, our housing stock needs to improve. Approximately £250bn is needed to retrofit all older UK homes to at least an EPC rating of C (the UK average is currently a D). 

The market is starting to respond, with demand for solar PV increasing by 676% since 2020, and heat pumps by 160%. But homeowners won’t be able to foot the £250bn bill themselves, and will need help from lenders to fund the upgrades.

As well as offering green mortgages, brokers can be the trigger needed to complete retrofitting projects - by working with home improvement suppliers to incentivise retrofitting, giving brokers around £700 per property in commission and making it easier for homeowners to arrange the work needed.

Dealing with the fluctuations of the pandemic, political changes and interest rate hikes, mortgage brokers haven’t had the easier ride! However, brokers are now able to contribute to a greener world. 

How green mortgages work

In the UK, around 85% of all mortgages are intermediated by a broker, and this rate continues to rise.

Research by Lloyds Banking Group found that 68% of homeowners and 87% of landlords want support from their bank or mortgage advisor to retrofit their home. To meet this demand, brokers are either able to lend for green home improvements under existing home improvement finance, or a specific green mortgage product can be used. 

A green mortgage is a mortgage specifically gearer towards eco-friendly properties. To incentivise the borrower to either buy a green home or to renovate an existing one, the lender offers them a mortgage at either lower interest rate or for a higher borrowing amount.

Green mortgages make energy efficient homes more enticing by offering better rates, as well as making funding green home improvements easier. Due to the lower ongoing running costs, lenders are able to confidently lend more on greener homes, or give a better rate. Some lenders also offer cashback schemes, which pay up to £1000 for homeowners who are improving a property’s energy efficiency.

Whether you're looking to purchase a new energy-efficient home or renovate an existing property to reduce its carbon footprint, partnering with a knowledgeable mortgage broker can streamline the process and maximise your savings. 

By seeking out professionals who specialise in green financing and understand the nuances of eco-friendly mortgages, you'll be better equipped to achieve your sustainability goals while also securing favourable terms for your mortgage.

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