The green mortgages market has grown rapidly in the last five years. In 2019 we had four green mortgage products, now we have 61 and counting. This dramatic rise – catalysed by the Green Finance Institute’s (GFI) Green Mortgage Campaign – came partly in response to anticipated regulatory changes aimed at lender back books. But it went further than that; there was also a dawning realisation across industry that this was only going to get bigger, so why not get ahead of the curve? Fast forward to 2024, and the measure of progress is less about the quantity of products coming to market, and more about the quality of innovation. What might be dubbed ‘first generation’ green mortgages – i.e. products that reward existing energy efficient homes through rate discounts and other features – have paved the way for more sophisticated solutions targeting a deeper impact on consumer decisionmaking. Examples include the Perenna and Octopus Zero Bills mortgage, and green lending propositions from Danske Bank, Accord and Leeds which factor energy efficiency into affordability calculations, effectively letting consumers borrow more for a greener property. If this tailored approach to affordability sees wider adoption, lenders wouldn’t have to artificially manufacture green incentives; the market would do it for them. Alongside this, we have seen the emergence of integrated solutions that make retrofitting a seamless part of the financing journey. Proponents of green adviser education have long been saying ‘brokers shouldn’t have to become retrofitting experts’. But most consumers still need hand-holding through the process, and financial firms are ideally placed to bridge the signposting gap. Green is also breaking out of its silo. More lenders are offering incentives for green home improvements to all customers as standard, such as the Halifax Green Living Reward launched last month . This typifies the shift we’ve been seeing from ‘products’ to ‘propositions’ – where, rather than consumers having a binary choice between green vs. mainstream, there’s a ‘green thread’ running through all available options. What does all this mean for the intermediary sector? While we have seen great progress, it’s fair to say momentum has slowed in other areas. With a cost-of-living crisis, an energy crisis and interest rate shock for many households rolling off fixed mortgage rates, it’s easy to see how sustainability fell down the sector’s priority list. But the apparent lull is deceptive. Rather than losing steam, the market is taking stock and maturing. The new Labour Government has made climate policy central to its five missions, and intends to work with banks and building societies A deeper shade of green: What's next for the green mortgage market? 08 AUTUMN MORTGAGE NEWSLETTER Chloe Timperley Green Mortgage Campaign Lead Green Finance Institute
RkJQdWJsaXNoZXIy MjI4MjU4NQ==