In a speech to be given later today (April 19) at the London Institute of Banking & Finance’s mortgage conference, the FCA’s director of retail banking David Geale is expected to outline the regulator’s commitment to the area.
It is understood that Geale will outline some of the main issues presented by the advent of green mortgages, notably the possibility that homeowners who are not in a position to improve the energy efficiency of their homes may be penalised by mortgage lenders.
Lenders adopting a blinkered approach and targeting only to the most efficient properties would have the unintended consequence — David Geale, FCA
Green mortgages are a self-determined label by mortgage lenders, with no commonly accepted definition. Generally though, products have a discounted fixed rate or offer cashback on properties that have improvements made to boost the energy performance certificate rating.
Green mortgages have been on the rise in recent years as the threats posed by climate change have become more apparent and mortgage lenders have taken steps to help nudge property owners to reduce emissions.
In his speech this afternoon, Geale is expected to highlight the significant role green mortgage products can play in helping borrowers reduce their home emissions.
He will say: “It can be done in a way that avoids rendering some homes unmortgageable, and without leaving borrowers facing insurmountable costs to improve energy efficiency.
“What does the FCA want to see happen in green mortgages? We want to see ongoing innovation from lenders, with compelling incentives that will influence consumer decisions as they seek to improve the energy efficiency of their homes.
“And we will continue to monitor the sector, making sure that where lenders have set out decarbonisation targets for the homes they provide mortgages for, they have a credible plan to achieve them.”
Geale is also set to highlight the role of mortgage brokers and that the FCA wants to see brokers be empowered to support consumers in making appropriate decisions.
Concerns
Despite supporting the concept of green mortgages and green home finance more generally, Geale will also note a number of areas of concern the regulator has.
Last month, UK Finance’s chief executive David Postings said that while lending only to newly-built homes which are already energy efficient may ‘green’ an organisation’s balance sheet, it will not help achieve the goal of decarbonising the UK’s housing stock.
