How Green Finance Products Could Help You Make Your Home More Energy Efficient
For years, the UK has been criticised for combining the worst-insulated housing in Western Europe with the region’s highest energy bills. Yet green home renovations remain a top priority if the UK is to meet its 2050 net zero climate targets.
As more homeowners turn towards retrofitting to boost their home’s energy efficiency, the financial market has responded with a growing range of options to help people convert daunting upfront costs into long-term returns.
Running alongside government initiatives and subsidy schemes, the number of banks and building societies offering mortgages and other financial products to fund vital energy performance improvements is on the rise, according to Matthew Fleming-Duffy of Knight Frank Finance.
There is a growing variety of options for homeowners to ease the retrofit process and upgrade heat-leaking homes. For example, more and more mortgage lenders are ready to help, and this expanding market has the added benefit of reducing each lender’s Scope 3 emissions in the process.
Whilst any changes funded through this new wave of loans must boost a home’s energy performance to qualify – typically by funding upgrades such as insulation, renewable energy or heating-related projects – there’s evidence that improving a building’s green credentials will deliver added longer-term financial benefits, as well as slashing bills.
Energy-efficient properties are increasingly sought-after, as buyers recognise the improved comfort levels, reduced maintenance costs and lower energy bills they bring. According to Knight Frank research, upgrading a house’s energy efficiency could even boost how much your house is worth by up to 20%.
Their analysis showed that improving a home’s Energy Performance Certificate (EPC) rating can increase its market value by an average of 8.8% (the equivalent of around £29,000 on average resale values) for EPCs that move up two bands, such as E to a C. And, for larger projects, your house value could go up as much as 19.6% (around £64,400) for an uplift from F or G to C.
At present, domestic properties are said to account for nearly a third (30%) of energy use and a fifth (20%) of the UK’s greenhouse gas emissions, the majority coming from heating. Taking into account the uncertain outlook for energy costs, and how government regulations could tighten further to limit residential emissions, it’s in everyone’s interest to make our homes more climate-resilient.
And, with accessible green finance opening doors to cheaper energy bills, a more marketable house and a win for the environment, it could be time to start your journey to a more sustainable future.
For impartial financial advice on mortgages and loans that could help unlock your home’s retrofit potential and help you decarbonise your home, click the button below.
Find out how to finance your Retrofit Project here
Green Mortgages & Retrofit Finance: Funding your Energy-Efficient Home with Knight Frank Finance
You can also check out the full interview with Matthew-Fleming Duffy from Knight Frank Finance here 👇 (see below the video for a full transcript).
Introduction
“Hi, my name’s Matthew Fleming Duffy. I’m a mortgage broker with Knight Frank Finance.”
“I’m a green finance advocate because I’m a mortgage broker and I know that properties are a big part of CO2 emissions on planet Earth. And I care about the future. I care about protecting people in their homes, and I think for them investing in energy efficiency measures brings multiple benefits. Most people that install energy efficiency measures to their property report back positive outcomes. And that’s where I come in. I can help people borrow to make themselves have a better life.”
Why invest in home retrofit?
“So one of the things we see is a common misconception around retrofitting is that a lot of people feel that this is just about your carbon footprint. This is just about doing things for the planet, and actually it can be that as well as investing in your own home and your own future. Making your home more energy efficient can ensure you are reducing your exposure to energy price fluctuations in the future. Making sure your house is more comfortable to live in and indeed can ensure, potentially, increase the value of your property.”
“If I said to you or said to somebody if I could show you a way of reducing your CO2 footprint by investing in a property, would you be interested? They’d most likely say yes. I think that half the people you would speak to would say yes. If I then said, “Might cost you £20-30,000,” people would say, maybe not. Maybe not so interested. However, if I said to you if I showed you a way of investing in your property where those investments could reduce your bills, could reduce your exposure to energy price fluctuations in the future, indeed enhance the value of your property if and when you decide to sell, plus give you comforts around your home where the home itself is nicer, a nice environment to live in, so it’s more cosy, more comfortable and you’re doing your bit for the environment. Would you now be interested? At which point people tend to respond – tell me more.”
“Some people may choose to keep savings in their bank when we talk about financial planning. We’re looking at longer term objectives, which could be saving for weddings could be saving for retirement.”
“If we translate that to investing in your home, this can also be a way of safeguarding your own future. So for example, if we invest in this sort of technology on our property, we can see this growing body of evidence that suggests that this increases the value of your property.”
“So all options need to be considered when we as mortgage brokers start looking at funding home improvements and borrowing, of course, is where mortgage brokers can really assist, making sure that we’re considering all different types of mortgages and borrowing options for those homeowners.”
Which financing options are right for you?
“Now looking at individual circumstances, every person is unique, working in financial services. It’s a very difficult question to answer around, what would you do specifically? A single sum of money, because this very much reflects on what those individual circumstances are. We talk about a pyramid in financial planning that you need to make sure you and your family are protected. You need to make sure you are saving and investing. And that would include having a rainy day fund. So if you have only £5000 available, it might not be a worthwhile investment to put money straight into something that essentially locks that money away. But if you have surplus cash of £5000 then certainly investing in green technology investing in retrofit measures could be a really safe long-term investment.”
“Of course, if you don’t have funds available to make your home more energy efficient, then borrowing is the most obvious next step. With any individual in the UK, they could have a variety of solutions available to them, which would include personal loans from your bank. It can include mortgages, could include grant funding. If we look at this in its entirety, there are going to be short and long-term options and borrowing is a way of spreading the cost of those investments.”
What financial products are available?
“A green mortgage is commonly defined as one that rewards you for either buying or owning a property that is already energy efficient. So a property that has an A or B EPC rating is likely to benefit from slightly better rates or incentives such as cash backs. That’s what we’d see as a green mortgage. You can incorporate EPC, C into that if you’re talking about investment properties or buy to let properties and there are lots of products out there in the market currently something close to 50 different product groupings.”
“Then we need to talk about retrofit mortgages. Now. There’s a growing number of these types of products – its around about 20 lenders or so that offer this type of solution and this is where those lenders are actively incentivizing you as a homeowner to make your property more energy efficient. So taking your EPC rating up a banding or two is going to then move you into a position where you can again receive and accept those incentives, which could be different interest rates or cashback.”
“In the in the wider financial services market, you’ll find access to grants. You’ll find some personal loans. You’ll find green home improvement loans with your existing mortgage provider, where sometimes they’ll be at a 0 interest rate. You could even find financial services products that are being provided indirectly by utility companies, by energy companies.”
“Going beyond that, of course, this is where an intermediary’s benefits really come into their own. So as a mortgage broker here at Knight Frank Finance, we do look at conventional mortgages, green mortgages, retirement mortgages and even lifetime mortgages for older borrowers. So we’re looking at all options available to make sure that individual gets the right solution based on their particular circumstances and requirements.”
“I want to help people make informed decisions and take practical steps around improving their property, which includes making their homes more energy efficient. And that’s what I do here, at Knight Frank Finance.”
Find out how to finance your Retrofit Project here