Only half of lenders offer green mortgages

The research, which polled some of the UK’s largest mortgage lenders, found although there has been a drop in the past 12 months, almost three in five (74%) believe that green or net zero/energy efficiency linked mortgages will become a permanent part of their future product range (up from 59% a year ago). 

Despite this optimism, more than a third of lenders (35%) don’t believe they’ve made enough progress in the green mortgage space. Almost half (48%) lenders confirm they’ve made some progress, but also admit more can be done. Looking more broadly at the industry, more than three in four (78%) lenders believe the green mortgage sector has remained largely unchanged in the past 12 months. 

Whilst some lenders agree that green mortgages will play a big part of their future product range, that doesn’t mean all traditional mortgages will be replaced. Seven in 10 (70%) lenders agree that green mortgages will only partly replace mortgages as they are today. Although one in four (26%) lenders believe all mortgages will eventually become green mortgages. 

Lenders admitted there are more pressing issues above selling green mortgages. For example, more than a third (35%)  cite addressing the affordability of traditional mortgages for a broader customer base as the most pressing. More than a quarter (26%) believe in exploring digitalisation and improving the efficiency of the mortgage application process, while almost one in five (17%) believe responding to market competition and adapting lending strategies accordingly is key. 

Karina Gerdes, Head of Resilient Homes at Mortgage Advice Bureau, commented:  “We all have a responsibility to push the housing market to a more sustainable future - one that is as energy efficient as possible. Green mortgage products are just one part of the puzzle, and it’s promising to see that a number of lenders share this thought. 

“However, the pace of change is somewhat frustrating. Over 50% of our housing stock remains below the government’s goal of ensuring that most homes achieve an Energy Performance Certificate (EPC) rating of C or above by 2035. If we are to succeed in the race to net zero, collectively we need to enhance the appeal of energy efficiency. Green mortgages are one of the tools that can help us to achieve that.

"Lenders could potentially increase the penetration of green mortgages by increasing the amount that can be borrowed to improve the efficiency of a property, or by offering a lower rate or cashback. Meanwhile, brokers could focus their efforts on starting discussions and educating their customers about the financial benefits of retrofitting. Working together, we can transition into a more sustainable, environmentally conscious housing sector.” 

For more information, visit MAB’s Green Hub.