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Call to action

Rory Joseph is director and Sebastian Murphy is head of mortgage finance at JLM Mortgage Services

Last month, via Mortgage Introducer, we instigated something of a call to action in terms of what we can all do to lower our carbon emissions, to get to a point of carbon neutrality for every case we write, and to try and take seriously the responsibilities we all have to help, for want of a better phrase, ‘save the planet’.

This month, well you know what, we’re going to try and to do the same. Why? Because this is a defining issue for all of us. Just because COP26 is over, doesn’t mean any big solution has been found – there is no switch that can be flicked to make this right, in fact, it’s flicking switches that have probably got us into a worse place.

However, back to our mortgage market, and we fully understand that there is plenty of work we can be doing here. This is not just a call to arms for everyone except advisers, and we take our responsibility very seriously – we’ll be ‘going public’ with what we are doing very shortly.

But firstly, we think advisers have an opportunity to talk to clients about why this is important. It’s okay saying that we think the government are going to introduce measures which mean your house will have to move from EPC level E to EPC level C, but what are the benefits of doing this? And what is the value in doing this sooner rather than later?

We might think it’s an area where everyone has a base level of understanding, but that’s clearly not the case. Increasing that EPC level is going to mean cheaper energy costs for homeowners, and from a mortgage point of view, it’s likely that it will open up the availability of more mortgage products for the client. We’re already seeing more ‘green options’ and there is no way this won’t be a continuing theme of the market in the months and years to come.

Interestingly, for vendors, the level of EPC on the property is going to be increasingly important in terms of who can buy their home. As we know, by mid-2025 landlords won’t be able to let out a property unless it has an EPC C rating, which means that acquisitive landlords are less likely to be interested in properties that don’t hit this level.

Homeowners really need to get their heads around this because by not improving their EPCs they are cutting off a huge number of potential purchasers should they wish to sell.

Yes, landlords might be willing to buy a home rated E with the intention of improving it to C, but this improvement will not come cheap, and the likelihood is they will only be willing to pay a price that stacks up in order for them to have the money to carry out this work. The likelihood is they will be much more interested in those properties that already meet that level.

We are likely to see prices tiered by EPC levels, and if as expected, the government does introduce the same measures for all homes, then this will of course also impact on owner-occupier purchasers and how they look at the homes they want to buy and the prices they are willing to pay for them.

Lenders are also going to have to play a pivotal role in this and are going to need to shout very loudly about what they are doing. For instance, we recently talked with one lender who, quite fantastically, offsets all the carbon emissions of a property during the fixed-rate period of their borrowers’ mortgages. How great is that? And yet, on their initial marketing material this USP was listed in the small print when actually this is key to the product.

Let’s think about how positive this would be for younger buyers. They tend to have much more of a social conscience and compass, so let’s provide them with the information which is going to appeal to them.

We should not think this market is simply the preserve of 50-year-old men who can’t believe that, for example, younger people still want to live in city centre flats and apartments.

There could also be a shift from lenders in terms of how they communicate with new buyers. Many lenders send ‘new home packs’ to purchasing borrowers when they move into their new home. All very lovely, and who wouldn’t want a branded tea towel and some biscuits (!), but it’s not really necessary.

How about shifting this to a greener approach? Green printer paper. Green toilet paper. Reusable water bottles and coffee cups. Information on green energy suppliers and a focus on other ways the owner can reduce their carbon footprint. It will all help in how we engage owners to do more, and it will also remind us what we should be doing as individuals and businesses.

As mentioned, this is an ongoing process that cannot ever stop. It is not a ‘one and done’ deal. Far from it. We’ve all got to change and shift our attitudes and approach in this area – otherwise…well we think we all know what the consequences will continue to be.


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