Government eyes energy efficiency targets for UK mortgage lenders

Mortgage lenders could face targets to achieve an EPC rating of C across their portfolio properties by 2030 under consultation proposals

Mortgage providers could be required to publish the energy effeciency data of their property portfolios in addition to facing  EPC targets, under new proposals from the government aimed at encouraging green home upgrades.

Mortgage lenders and beneficiaries, estate agents and building energy efficiency experts have three months to give their say on the proposals as part of a consultation launched yesterday, which is seeking industry views on how energy efficiency can be “tightened up over time” across the UK’s mortgage market, the largest in Europe.

The Department for Business, Energy and Industrial Strategy (BEIS) is seeking views on a potential target-based approach to lenders achieving EPC band C for energy efficiency on average across their portfolios by 2030. 

One option could see mortgage providers could sign up to any improvement targets on a voluntary basis, with efforts backed by “some form of self-regulation that is comparable across lenders” developed by the market, the consultation suggests.

Voluntary EPC portfolio targets are the government’s “preferred approach”, but BEIS said it wanted to hear from industry as to whether mandatory targets would be necessary to “create a level playing field”.

“We will invite views on whether we should take primary powers to introduce a mandatory target to build on action taken by lenders during a voluntary phase,” the government said.

Moreover, the government is recommending mortgage providers annually publish the Energy Performance Certificate (EPC) data of their property portfolios, in addition to the amount they have lent for energy efficiency improvement works, according to the consultation document released yesterday.

Lenders would also be able to add additional commentary alongside submitted EPC data under the proposals, a measure designed to help lenders with older, less energy efficient properties, according to the government. 

It argues the move would help provide greater clarity and transparency over the current state of the market for green homes and energy efficiency upgrades.

The disclosure regime should be voluntary at first to enable swift implementation, but would eventually become mandatory, with the switch earmarked for  “2023 at the easiest” to allow time to draw up the new legislation.

The consultation comes as the government faces growing pressure to provide more funding and policy support to accelerate the decarbonisation of UK’s carbon intensive housing stock, which accounts for 14 per cent of total UK emissions. Privately owned UK homes fall “considerably below” the current standards for social housing, with eight per cent of occupants currently living in fuel poverty, according to BEIS.

This week the government also extended the Green Homes Grant, which supports households looking to make energy efficiency improvements to their homes, but with the UK’s 29 million homes among the oldest and leakiest properties in Europe, there have been growing calls for the government to support the creation of finance instruments that would accelerate the property market’s transition to net zero.

The government said “significant economic opportunities” could be unleashed if mortgage providers help homeowners improve the energy performance of homes, by creating and sustaining jobs across the home retrofit supply chain.

“In stimulating a market for green finance and capitalising on the existing interactions lenders have with mortgagors, we can ensure access to attractive finance options for homeowners,” the document notes. “Tapping into this commercial potential and developing this market could help to ensure that all households can benefit from access to finance, and that the energy performance of their homes is brought up to the required level as performance standards are tightened over time.”

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