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With household bills soaring, those hit the hardest are families living in the leakiest homes. Green mortgages could combat the UK’s leaky homes and bring down household bills in the long-run.
Research shows that households living in homes with an Energy Performance Certificate (EPC) rating of D or worse will be paying an average of £470 per year more than homes rated EPC C or better. That’s more than the average annual UK water bill.
The UK has the oldest and least energy efficient housing stock in Europe, meaning tens of millions of households are particularly vulnerable to energy price rises. This is true in my constituency of Bath, which is less energy efficient than the national average, probably due to our Georgian townhouses and pre-war housing stock.
With no national, public-funded retrofit scheme, many homeowners are priced out of energy saving measures, leaving them stuck in costly, inefficient homes.
The government must consider all the tools it has to support struggling households
I know from speaking to my constituents that homeowners are looking for affordable alternatives to finance energy saving improvements, such as replacing draughty windows, upgrading heating systems, and installing loft insulations. For many, this could be green mortgages.
Following Barclays in 2018, many banks and building societies now offer discounted mortgages rates, cashback and/or free valuations for homeowners who either: purchase energy efficient properties or take on additional borrowing to fund upgrades in existing ones.
Whilst the number of green mortgage products has increased quickly over the past five years, they still only make up a small proportion of the UK’s £265bn mortgage market.
The government can drive this nascent green mortgage market in two ways. First, by financially incentivising energy saving improvements. The Liberal Democrats have long called for stamp duty to be graduated by the energy efficiency rating. The UK Green Building Society has similarly called for a land duty rebate to reward homeowners who make upgrades within the first two years.
Second, the government can drive demand for green mortgages through improving consumer awareness. Here, the government can streamline the process from loan to retrofit by providing consumers – via mortgage lenders – with lists of accredited retrofit professionals by region, as well as a breakdown of the different energy efficiency measures available to households by average installation cost and projected energy bill savings. This would help empower consumers to make the best decision for their home.
Bath is one area which would particularly benefit from a green mortgage drive. Not only does Bath have a high proportion of homeowners, who either own outright or with a mortgage, but data shows that only 40 per cent of homes in the local authority of Bath and North East Somerset have an EPC rating of C or above. This is far below the 53 per cent average for England and Wales. Green mortgages would help to release the private capital tied up in homes, which can then be reinvested into energy saving measures.
With energy bills set to rise even further in Autumn, the government must consider all the tools it has to support struggling households. Green mortgages must be utilised to help families upgrade the energy efficiency of their homes: reducing bills, improving comfort and slashing emissions.
Wera Hobhouse is the Liberal Democrat MP for Bath.
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