Brokers have a key role to play in the penetration of green mortgages, but collaboration and training are key, it was said at the Mortgage Solutions Scottish Green Home Finance Summit.
The green mortgage market has grown over the past five years to around 60 products strong.
A speaker said the growth in green mortgages over the period was a “good success story” but it was “time for taking stock”.
They added that the “flurry of initial innovation has somewhat slowed down” and the “low-hanging fruit” of mortgages that reward owners for having an Energy Performance Certificate (EPC) A- or B-rated home has been “taken advantage of, and now lenders are looking to do something a little bit more meaningful”.
They said demand for products hadn’t been as strong as lenders would have liked to see, so this area of the market was at a “critical juncture”.
“I think this was a bit more of a ‘build it and they will come’ mindset, and we tried to throw open the doors, but it wasn’t really built with consumers in mind, and I think that’s probably the place we’re at now, where the focus is shifting onto the intermediary sector.
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“Mortgage brokers have a really important opportunity to be able to connect people with talk, just talk about green home energy efficiency, and connect them with the right solutions,” they noted.
Green mortgage education ‘fighting for space’
Another speaker said there were several barriers that brokers are coming up against, including their massive workloads, how to fit in training on this and the lack of certainty around legislation making it harder when “fighting for space”.
They said there needs to be certainty and then a campaign that “we can all, every single one of us that is involved in this ecosystem, get behind”.
“We are not green home experts. We’re finance experts. You don’t want us to be green heating expert[s], but we have a really crucial role to play in that signposting. Then people can go away and figure out what it is that they want to do that’s right for their home, and then they can come back to us for the finance.
“We’re right behind that signposting and getting out there, but we’re stuck right now because we don’t have that certainty and we don’t have that full awareness or that… one place, that one campaign, that we can point to and say: ‘Look… the government’s come out, there’s a campaign at the moment.’ It’s just far too fragmented,” they said.
A further speaker agreed that it has to “start with the adviser and the industry, and it needs to be collaborative”.
“We have to make sure that we’re working hand in hand and we’re all singing off the same hymn sheet, so that we’re all joined up, because the last thing we need is confused messaging,” they noted.
Green mortgages need to be contextualised to help brokers ‘bridge the gap’
Another speaker said that to put green mortgages and energy efficiency high on brokers’ agendas was to put it into the context of Consumer Duty, affordability and financial vulnerability.
“It’s easier for them to understand the bridge and then also explain it to the customer,” they said.
They added that another way to get brokers on board was talking about outgoings’ predictability and how that is linked to energy efficiency.
The next element is linking it to the business case, so what is in it for the broker.
“It’s about helping a customer avoid the high upfront cost, which obviously then leads to procuration fees for brokers, and there’s your business case for higher proc fees through higher loan values.
“It’s starting to change the level of the conversation a little bit and also help brokers… think slightly differently,” they said.
For instance, customers may not be concerned about their EPC, but lots of customers may be worried about rising energy bills or the fact they won’t be able to repay their mortgage, or their living is being impacted, so that can “bridge the gap”.
‘Blended approach’ for different age groups needed
An additional speaker said it was important to “have different approaches for different age groups”.
“I think you probably need to look at a range of solutions and maybe some blended approach[es], because I think your first-time buyers are quite happy to look for lower interest rates in order to green their home, but for older ones, perhaps looking at blended solutions, combining potentially later life lending or government grants, lender-backed incentives.
“I think in order to really grab it, you need to look… at a blended approach, because I don’t think one size always fits all,” they said.
They added that it was also key to “move from niche to norm” and start “putting green into every conversation. It’s about putting green into every mortgage, and then it becomes the norm for everyone”.
