Building a green mortgage market Tuesday 20 March AECOM, Aldgate Tower #GreenMortgages UKGBC - Together for a better built environment 1
Agenda 09.00 Introduction Richard Twinn, UKGBC 09.05 EeMAP project overview Stephen Richardson, WorldGBC 09.15 EeMAP consumer research Marco Marijewycz, E.ON 09.25 Green Finance Taskforce Gervase Poulden, BEIS Ecology’s sustainable mortgages 09.35 Ian Rigarlsford, Ecology Building Society 09.45 Panel discussion 10.30 Panel discussion close 11.00 – EeMAP workshop 13.30 UKGBC - Together for a better built environment
www.EPCmortgage.org.uk • Aim to better represent energy in the mortgage process by looking at the fuel estimates in financial affordability • LENDERS website provides example ‘Decision in Principle’ stage prediction tool
EeMAP: The Story So Far Stephen Richardson, WorldGBC
Why mortgages and why now? • Mortgages = ⅓ of total EU banking sector assets - worth ½ EU GDP (€7 trillion) • Most well-known and cheapest form of property loan • Engage with key “trigger points” for renovation (purchase, refinance) • EU capital market reforms – EU setting out strategy for sustainable finance • Leading mortgage lenders recognise case for favourable capital treatment if loan data can evidence lower risk
Growing enthusiasm amongst Europe’s biggest banks “opens tremendous social and economic opportunities for households, lenders and investors” “has the potential to change consumer behaviour ” “A clear and common framework constituting an Energy Efficient Mortgage would help us grow this market ” “ we support the development of the EeMAP initiative” “ Now is the time for private financial institutions to enter the market at scale”
“A unique partnership to leverage the power of mortgage lending in reducing the energy use of Europe’s buildings.”
EeMAP GBC Team
Project Timeline: Energy Efficiency Work 10x National Workshops 2018 2019 2017 OCT NOV DEC JAN FEB MAR APR MAY JUN JUN Research Phase Consultation Pilot Phase Draft Initial Proposals & State of Pilot Consumer Updated Play Outcome Research Proposals Reports s for Pilot Public Phase Consultation Closes 12 March
Building Assessment Briefings Detailed market intelligence covering: • Characteristics of the building stock Energy performance certificates, eg: access, QA procedures, • coverage, etc. Other energy performance assessment infrastructure • Energy performance measurement infrastructure • Existing EE finance initiatives • Sustainability assessment and certification landscape • Available from worldgbc.org/green-mortgages
EeMAP Pilot Scheme June 2018 onwards • To test the EeMAP guidelines in an operational environment • Create the learning and relationships needed to strengthen value-chains • In time, mortgages will be issued, in line with EeMAP’s proposed guidelines • Lenders will identify and ‘tag’ existing mortgages that meet the requirements • Anonymised data on energy performance will be collected by the EeMAP consortium
EeMAP National Workshops • To gather detailed national feedback on proposed Building Performance Criteria • To explore national implementation • Feedback will be collated by WorldGBC Europe • Feedback used to refine to proposals ahead of the pilot in June
Energy Efficient Mortgages Initiative Consumer Research Insights Marco Marijewycz International Market Manager, E.ON EeMAP Consortium Member 16 www.energyefficientmortgages.eu
We conducted 500 interviews in each market with consumers who had recently taken out a mortgage, or were actively considering a mortgage First time buyer 19% 24% 17% 1 st mortgage or considering first mortgage Experienced mortgagee 54% 54% 48% onto their 2 nd or more mortgage Multiple mortgage holder 27% 22% 34% 2 or more mortgages 17
Whilst energy efficiency is relatively less important than price and location when buying a property, in Italy it is a key consideration Important factors when buying a property All respondents Price Price Price Location of the property Location of the property Location of the property How energy efficient the Size of the property Size of the property property is Importance Layout of the property e.g. Outdoor space included e.g. Size of the property floorplan garden How energy efficient the Look and design of the Closet and storage space property property is Look and design of the Layout of the property e.g. Age of the property property floorplan Outdoor space included e.g. How energy efficient the Outdoor space included e.g. garden property is garden X1. Which of the following are most important when considering which property to buy? 18 Base: UK (525), Italy (516), Sweden (543)
Then we introduced an Energy Efficient Mortgage concept which was adapted with feedback from our initial focus group phase Energy Efficient Mortgage (EEM) Standard Energy Efficiency Mortgage Improvemen t Loan Product (EEIL) Packaged mortgage product made up of two linked loans • • EEM product carries an interest rate discount EEIL is a low cost loan facility linked to mortgage • • EEIL funds upgrades determined by energy audit • Two installation approaches available – managed or DIY
Across each market, we asked a series of questions to unpick reaction to the proposition Is there an appetite to take Is it How appealing Is it relevant? out a Energy understood? is it? Efficient Mortgage? We’re able to isolate key consumer groups across each metric, to understand who may be the initial target market for the Energy Efficient Mortgage (EEM) 20
The majority of consumers in all markets feel they are clear how the Energy Efficient Mortgage works… Claimed understanding of EEM proposition All respondents Very / Very / quite Very / quite clear clear quite clear 80% 58% 72% Very clear Very clear Very clear 53% 30% 42% * Unclear in each market 7% of less B3. How clear are you on how this new mortgage product works? 21 Base: UK (525), Italy (516), Sweden (543)
… and Italian’s feel it is most relevant, as some consumers in Sweden struggle to believe it could be of interest to them Claimed relevance of EEM proposition All respondents Very / Very / 20% Very relevant quite quite relevant 79% relevant 63% Very Very / quite 43% relevant Very relevant relevant 53% 34% Not at all 19% relevant * Not at all relevant UK = 10%, Italy = 3% B2. How relevant is this new mortgage product to you? 22 Base: UK (525), Italy (516), Sweden (543)
The Energy Efficient Mortgage holds greatest appeal to the Italian market, and outright rejection of the proposition is minimal… Appeal of EEM proposition All respondents “I like the idea of improving energy efficiency and I think that in the long run I’ll save money” “This would be brilliant – we’ve been wanting to do Italy something like this for years… there’s no downside – 10/10” Very appealing 37% 55% 31% (T2B) Sweden “I like trying to be green and love idea of Very / quite being rewarded for it” appealing 66% 80% 58% UK (T3B) “An excellent opportunity for energy improvement in my home, helping not only me, but the environment” Very unappealing 7% 3% 9% Italy (B2B) Significantly higher or lower vs. other markets B1. Thinking broadly about the new mortgage product you have seen, how appealing do you find it? 23 Base: UK (525), Italy (516), Sweden (543)
Those who do not find the Energy Efficient Mortgage appealing are already planning on buying an energy efficient property, or do not want to take out an additional loan Barriers All who do not find the EEM appealing Most important reason (select 1 only) Do not want to take out / cannot 18% 25% 23% afford an additional loan Primary barriers I already have an energy efficient 18% 11% 15% home, therefore it is not applicable to me 24 B10A. BARRIERS: Which of the following reasons best describe why you do not find this product appealing? UK=62, IT=35, SW=96
Length of time for the work and a predicted short tenure are secondary barriers, alongside a worry about ‘being tied in’ to a certain mortgage Barriers All who do not find the EEM appealing Most important reason (select 1 only) Don't have time for home renovation / too 10% 6% 7% much of a hassle I don't see myself in my home long enough 3% 11% 7% to benefit Secondary barriers Worry this would tie me in to a mortgage 8% 6% 4% provider for a long time I am not interested in making my home 6% 8% 3% more energy efficient All other barriers under 6% 25 B10A. BARRIERS: Which of the following reasons best describe why you do not find this product appealing? UK=62, IT=35, SW=96
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