January 4, 2024 10:48 am

Insert Lead Generation
Nikka Sulton

Eco-Friendly Mortgages: Worth the Investment? Buyer awareness of green mortgages is on the decline, as indicated by recent research. According to the study conducted by Mortgage Advice Bureau, almost two-thirds of mortgage advisers report that their clients lack knowledge and understanding of green mortgages. This marks a notable increase from the figures recorded in the previous year. 

The research also reveals a rise in the number of conversations with customers where the topic of green mortgages has not been broached, accounting for 16% compared to 12% in 2022. This trend underscores the growing necessity for increased education and awareness regarding these eco-friendly financial products.

The Mortgage Advice Bureau (MAB) has highlighted a noticeable decline in awareness of green mortgages among buyers, as indicated by recent research findings. This shift is attributed to the challenges posed by a particularly turbulent year, where advisers have been grappling with a multitude of issues, diverting attention from eco-friendly considerations. For many advisers, the demands of addressing pressing concerns, such as the cost of living crisis, have taken precedence over discussions about green mortgages and Energy Performance Certificate (EPC) ratings.

Educating clients on the benefits of green mortgages and the significance of EPC ratings has become a complex task, with 52% of advisers acknowledging the formidable challenge posed by discussions on the cost of living crisis, particularly the retrofitting costs associated with energy-efficient improvements. The prioritization of immediate financial concerns has led to a decrease in the frequency of conversations about green mortgages. Approximately one in five advisers express the difficulty of navigating information overload, which can undermine the trust that homebuyers place in their advice. The overwhelming amount of data may make it harder for clients to discern the value of eco-friendly options in the midst of broader economic and societal challenges.

Moreover, the research indicates that conflicting messages in the public domain contribute to the challenge of educating customers about green mortgages. About one in nine advisers find it challenging to provide clear and concise information due to the prevalence of contradictory information. In addition, eight per cent of advisers point to the government’s U-turn on the minimum EPC legislation for landlords as a noteworthy challenge. The abrupt policy changes may contribute to uncertainty among clients regarding the long-term viability and stability of eco-friendly investments. Another seven per cent cite the inaccuracy of EPC ratings as an obstacle in promoting confidence in green mortgage initiatives. These challenges collectively underscore the need for a more nuanced and comprehensive approach to promoting awareness and understanding of environmentally sustainable housing options.

Despite the acknowledged challenges, 22% of advisors recognize the need for increased public awareness and education regarding the advantages of green mortgages. Addressing how knowledge and initiatives could be enhanced, one in four advisors suggests that the mortgage industry should provide more competitive interest rates and incentives for green mortgage products. Simultaneously, a fifth of advisors believe that the industry should diversify its offerings by developing a broader range of green mortgage products tailored to different needs and budgets.

Presently, the majority of advisors only introduce clients to green mortgages when the property in question aligns with the criteria for such products. Despite limited discussions around green mortgages, 45% of advisors note tangible progress in the green mortgage sector compared to a year ago. This pragmatic approach highlights the growing recognition within the industry of the need for practical steps to promote green mortgage adoption, emphasizing the role of incentives and product diversification in facilitating the transition towards environmentally sustainable housing options.

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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