26 Skyline | Edition 3 | Winter 2021
What is the benefit of the green approach to lenders ?
It would be wrong to say it ’ s that warm and fuzzy feeling you get when you are doing the right thing , as lenders have to be much more pragmatic . Their business is about calculated risk . However , as we move further into the decades and edge closer to 2050 , properties that meet the EPC requirements should have a stronger intrinsic value – or green value . As a consequence , they should be more attractive to future purchasers and probably hold their value , even in hard times . It could be that a lender will offer lower rates for these energy efficient homes , as they therefore have less risk and there is increased value to both lender and now the purchaser , as they will be cheaper to run and more cost efficient .
The challenge – 2050 Net Zero
The green agenda can be a little complex but as a country and part of a wider group of 132 nations , we have committed to the date by which we should be meet ‘ Net Zero ’– but what does that mean ?
In its most simplistic terms , it means by 2050 we won ’ t be adding greenhouse gases to the atmosphere and therefore we will keep global warming at 1.5 degrees Celsius and hopefully reduce the dramatic impact of climate change . It ’ s a big ask as the only way we can do that at this stage is to reduce greenhouse gas as much as possible and then neutralise anything that is still harmful in our output .
To do this there is the expectation that we will have to rely heavily on our tech boffins to come up with viable solutions to extract these gases from our environment .
The hurdle in our way
Put simply , our UK homes currently account for more than a fifth of the UK ’ s total CO2 emissions . [ 1 ]
Our housing stock is old , although it has to be said not undesirable , as we only have to look to towns such as London , Bath and Edinburgh to see that there is considerable Georgian , Victorian and Edwardian stock occupying prime positions in both conurbations , but the majority of homes EPC
We are in the position where there is much work needed to retrofit and renovate these older properties and this is where some green mortgages could really come into their own ratings are considerably higher than new properties where obviously this has been taken into account from the outset .
The government has stated that 60 % of our homes are currently below EPC ratings Band C and has committed support to ensure that many homes are Band C and above by 2035 . However , of that 60 %, it is estimated that 50 % of those homes have no applicable mortgage and therefore , how do we incentivise or cultivate the owner ’ s approach . Without support , and where the homeowner is left on their own to fund such work , surely this is going to be hugely prohibitive and a significant speedbump in the road to 2035 , never mind 2050 . Even the government ’ s terminology hints at the challenge with ‘ where cost-effective , practical and affordable ’ the challenge is made very clear as with some housing stock , that achievement of raising the bands may not be practical in the slightest .
We are in the position where there is much work needed to retrofit and renovate these older properties and this is where some green mortgages could really come into their own .
So , what exactly is a green mortgage ?
Each provider is approaching the topic in their own way , but generally , a green mortgage is one that rewards someone for buy-