Existing Housing and Climate Change
to the Communities and Local Government Committee
26 September 2007
Introduction
1. The Council of Mortgage Lenders (CML) welcomes the opportunity to make a submission to the Committee in response to the inquiry into existing housing and climate change. The CML is the representative trade association for the residential mortgage lending industry. Our 161 members currently account for around 98% of the UK residential mortgage market. General
2. The CML is committed to various measures to reduce carbon emissions and has recently signed up to the Trade Association Forum's Declaration on Climate Change. This Declaration can be viewed at http://www.cml.org.uk/cml/media/press/1176. 3. We are not experts on the performance of buildings or their contribution to climate change. However, it is generally understood that existing housing stock is making a very significant contribution to CO2 emissions. Our comments in this submission are limited to our views on energy performance certificates and green financing. Energy Performance Certificates (EPCs)
4. The CML is supportive of the concept of EPCs. However, providing an energy performance certificate with a home information pack does not guarantee householders will actually take energy-saving measures. While EPCs are a good first step, unless householders act on the information they contain they will not improve energy efficiency and reduce carbon emissions as the government suggests. It will be important to get feedback from the HIPs roll-out as to what action either sellers or buyers take as a result of receiving an EPC. 5. Our view is that EPCs should be much more widely available to homeowners at all points during their homeownership. We believe householders are more likely to take action to improve their properties while they are living in the property and will be able to benefit from the savings than at the point of sale when there are other things that they would prefer to spend their money on. 6. In addition, delivering EPCs through HIPs means it will take more than 13 years before all home-owners have received one. Yet delivering EPCs is the government's main rationale for pressing on with HIPs. We believe the Committee should reflect whether EPCs could be delivered more quickly and more universally in a different way. We believe that a possible solution would be for HIPs providers to market a de-coupled EPC product that would enable home-owners to access both the current rating of their dwelling and the cost effective improvements report that could guide their investment at any time throughout their ownership of the property. Delivering energy efficiency and green mortgages
7. The Committee has not specifically mentioned green mortgages as part of its inquiry. However, this is often mentioned as a way of helping to deliver energy efficiency. While the government is keen to encourage the provision of more 'green mortgages', it has yet to define what it means. We are willing to explore the possibilities but there are no standard definitions badged in this way, and only four lenders currently offer the product. Several of these are carbon offsetting arrangements rather than encouraging energy efficiency measures in the home. Consumer demand for green finance products is currently small. The Energy Efficiency Partnership for Homes (EEPH) has attempted to give a standard definition of a "green" mortgage. This can be viewed on their website http://www.eeph.org.uk 8. A report in 2005 from the Centre for Sustainable Energy "Making mortgages energy efficient" considered whether financial incentives combined with an energy efficiency report would encourage home owners to be more energy efficient. The report concluded that: "We are faced with an indifferent home-buyer and a mortgage market unconvinced by the commercial potential of promoting sustainable energy use in their products. Changing this will require concerted effort to tackle this consumer indifference and to bring to the market competitively priced mainstream mortgage products which make it simple and enticing for the home-buyer to take action to improve sustainable energy use."
9. The report also reviewed take up in a number of countries where "green" products were available and found that take up was poor. 10. We do not believe that "green" mortgages are necessarily the best way to finance energy efficiency in the home. For example, some energy efficiency measures such as loft insulation or cavity wall insulation are relatively low cost, and it would not always be cost efficient to spread the cost of this over the term of a mortgage; other financing might be more appropriate. EEPH hosted a seminar last year which explored some of the drivers for "green" mortgages and barriers to the take up of them. A report on this seminar can also be viewed on the EEPH website. 11. We believe other incentives may be more effective to encourage people to make energy efficiency improvements, including council tax rebates, fiscal incentives such as government grants for energy efficient technologies and removing/reducing the VAT on materials and labour and/or giving tax relief for home improvement loans. We believe this, combined with readily available energy performance certificates (EPCs) at all points during homeownership, is much more likely to achieve the policy aims that the government desires than development of 'green' mortgages. This response has been prepared by the CML in consultation with its members.
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