In this section we share our insights on the current state of Green Home Finance and the possible next steps for the Government to support the development of the Green Home Finance market.
Could the new Labour government give green home finance the boost we've been waiting for?
According to UK Green Building Council (UKGBC), the UK has one of the oldest and leakiest housing stocks in western Europe. Their Whole Life Carbon Roadmap found that homes are the largest single contributor of carbon emissions from the built environment.
Meanwhile, the number of green mortgage products launched in the UK is steadily increasing. To achieve the UK's target to reach net zero by 2050, lenders need to incentivise borrowers to decarbonise their homes.
But demand for retrofitting and green mortgages doesn't seem to be high on the average consumer's list of priorities yet - despite the long-term benefits of a more comfortable home and cheaper energy bills.
Both UKGBC and the Green Finance Institute have long been calling for a comprehensive and long-term strategy to encourage homeowners and landlords to make energy performance improvements – which could really ignite the green home finance market.
Could we be about to see real change here?
The Labour party has pledged to partner with the financial services sector to support greening the housing stock. In their financial services manifesto, Labour said they will:
- Work with banks to expand offering of affordable products to meet increased demand for retrofitting work including insulation, heat pumps, and solar panels.
- Support expanding the offering of green mortgages, which may be less expensive than other mortgages. This could include providing access to green mortgages to homeowners who complete retrofitting work, as well as including financing for retrofitting works within green mortgage offers for new homeowners.
What else can be done to drive demand?
The Climate Change Committee (CCC) recently said that taxes on electricity should be shifted to gas so that people feel more benefit from using green technologies, such as heat pumps. The Committee also wants the new Labour government to reverse the decisions made by the last government, which slowed down carbon cutting plans. Credible plans and stable policies could help drive industry confidence in the UK - the CCC reported that countries like the Netherlands and France are seeing greater uptake of heat pumps than we are in this country.
Clearly industry confidence and inclusive support for customers to retrofit their homes in an affordable way, with work undertaken by retrofit professionals who will complete the work to a required standard would go a long way to help.
The regulator is keeping a close eye on this market too - the FCA have said they expect to see more innovation and expansion in this area and will continue to monitor the sector to ensure that lenders can demonstrate their Consumer Duty considerations for these products.
We're watching this space!
Next steps
If you would like to discuss anything raised in this article, feel free to contact our Regulated Lending and Banking team.
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