Interview: Green mortgages MAB and Switchd give their thoughts on getting green

What’s key to making homes energy efficient?

Incentivising green mortgages is among solutions, says expert

Ben Thompson

With raging inflation, rising mortgage interest rates, and rocketing fuel and food prices, you’d be forgiven for thinking that the last thing on the minds of most homeowners is spending their hard-earned cash to reduce their carbon footprint.

A recent study by property experts Cornerstone Tax found that 45 per cent of homeowners have been put off making their homes more energy efficient due to the cost involved.

And there are other hurdles. The same study also revealed that 22 per cent of homeowners looking to make their homes more energy efficient found it impossible because of planning restrictions.

The government has also met with criticism amid claims it’s too hard for consumers to set up the Smart Export Guarantee (SEG) scheme, which pays households for the solar energy they ‘export’ (that is, electricity that’s not used but pumped back into the grid).

Ben Thompson (pictured), deputy chief executive officer at the Mortgage Advice Bureau (MAB), agreed that environmentally conscious households were facing an uphill struggle, especially now.

“There’s obviously lots of rocks in the road and major challenges around affordability at the moment,” he said. “People have various other challenges in terms of household expenditure, and the obvious barriers are big, but what we’re also lacking is an experienced pathway and awareness to getting to 2030.”

The date is significant. Eight years from now, the UK is committed to reducing economy-wide greenhouse gas emissions by at least 68 per cent (in 2025, all buy-to-let property starting a new tenancy will also require an EPC rating of at least C). By 2050, the aim is for the whole of the UK to be net zero.

Given that households are one of the biggest emitters of greenhouse gases, accounting for 26 per cent of total emissions in the UK on a residency basis, there is a sense of urgency that something should be done now to lower the carbon footprint in homes, at the very least.

MAB recently shared five steps to achieving exactly that, including draught-proofing a home, taking out a green mortgage (which rewards consumers for buying or owning an energy-efficient home), and saving energy by installing smart meters and heat pumps.

With the purchasing power of household incomes set to plunge by 10 per cent, Thompson was asked if consumers could afford to make all these improvements.

“No, quite simply. And I think a lot of people couldn’t do it even before, in the last six or nine months,” he said candidly.

If it sounds like a hopeless situation, Thompson stressed that this wasn’t the case. Changing consumer behaviour, and offering bespoke solutions – including mortgage rates at least as competitive as standard ones to incentivize people – were ways forward, he said.

“Consumers will be incentivized if it’s cheaper. Those are the things that are within the gift of lenders,” he said. “Is anybody better placed to have that discussion with consumers and mortgage intermediaries? I think the answer is no.

“As an industry, we’re better off working together around how we approach pricing and availability of mortgages, and we need to try to really speed that up,” he said. “We’ve got a brilliant intermediary industry. It’s not beyond the art of the possible to start to find ways to prioritise so-called green mortgages, and, in particular, the pricing and the attractiveness of those products in helping people to move from a low EPC rating to one that says C-plus.”

Regarding the five steps, Thompson said the the message intermediaries should be putting across is that “there’s something that can be done very quickly” and that households can take “baby steps” to reach an A, B, or C rating. Getting the message across that homeowners can also see huge savings in the long run is equally crucial, he said.

“The difference between a G-rated property and an A is about £40,000, and that’s the sort of thinking we need to start instilling – you’re actually improving the value of your home,” he noted.

“There’s a massive opportunity for us as a sector to promote that conversation with customers, and even if they don’t do anything for four years, it doesn’t matter. You’re sowing a seed for the next conversation for when you might want to do something with them. Now’s the time to start thinking and talking that way, because we’ve got a chance to do this.” M I

Co-founder calls on government to help struggling households

Push for solar urged amid mounting threat of fuel poverty for millions

The head of two green-energy-focused firms has called on the government to do more to help UK households struggling with rocketing fuel prices.

Llewellyn Kinch (pictured), co-founder of UK energy-switching service Switchd, and MakeMyHouseGreen, which uses smart data to calculate savings made by green technologies, said more needed to be done to support struggling households.

He was also critical of the government’s Smart Export Guarantee (SEG) scheme, launched in January 2020, which pays households for solar energy they ‘export’ – that is. electricity generated but not used, which is pumped back into the national energy grid.

Speaking to Mortgage Introducer, he said, “The smart export guarantee is not good for two reasons. It’s a real pain for customers and their energy suppliers to set up. And then it just doesn’t pay very much. Wholesale rates for electricity are at 30p per kilowatt hour, but you get paid 5p, which just doesn’t make sense; it doesn’t feel like it’s incentivizing you to get bigger or to help provide that green energy.”

Kinch made the comments shortly after Switchd issued a statement urging households to adopt solar power to save on soaring energy bills, which could hit £4,266 a year from January 2023.

Kinch said households could slash bills by adopting solar power, adding that by reducing dependence on the national grid, they could benefit not only the environment but also other households by helping to bring prices down.

He said the attraction of solar energy was on the rise even before Russia’s invasion of Ukraine caused fuel prices to soar, which is now threatening to plunge many households into fuel poverty this winter.

“There was a real upward trend regardless,” he said. “People were interested in going green, so there was a real drive toward making your home green anyway. The increase in energy prices has driven more of that. It’s probably caused just as much pain as it has benefit because there’s loads of demand, which means that our suppliers are struggling to deliver the best service they can.”

Switchd has estimated that a small solar system of eight panels could cost £5,500, with savings of £749 a year.

And although the UK enjoys roughly half the number of hours of sunlight per year of Mediterranean countries, Kinch insisted that it still makes sense to install solar panels in homes.

“You are still getting a decent output, even when there’s cloud cover. There’s still a lot of light coming through. It’s not as good as it would be in the south, but you still get more than enough output to make a good return on your investment, particularly if you’re using that energy for yourself rather than exporting it, because then you’re saving 13 kilowatt hours,” he said.

However, aside from the cost of installing solar panels, UK households face a multitude of other challenges when it comes to being energy efficient.

A study conducted by EDF of 21 million homes across England and Wales found that over half (58 per cent) only meet insulation standards of 1976 or earlier – potentially costing households up to £930 a year to make them net-zero-compliant.

Kinch conceded that insulating a home should be a priority, as it has a much bigger environmental impact and involves a smaller investment than solar.

To add to the challenges faced by homeowners, according to a report in the Guardian newspaper last year, nine in 10 households rely on gas boilers, adding that UK households have higher gas consumption than almost all other European countries, at roughly twice the EU average.

That report appeared last September, before the Ukrainian conflict sent fuel prices soaring even higher. Kinch cited this as an added reason to incentivize households to get solar. “The more they generate themselves, the less they have to depend on gas,” he said.

The tide could be turning. New data from the MCS (Microgeneration Certification Scheme) – the national standards body for renewables – shows that 61,320 UK properties had solar panels installed in 2021 – a 71 per cent increase on the previous year (35,841).

And according to Switchd, home solar panels are expected to pump out far more this year than the 3GW of electricity they produced in 2021 – and that was a record in itself. M I

Llewellyn Kinch