Building Societies Association
Feature
The Green Deal: a missed opportunity?
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Contact: Colette Best Date: 31 Jan 2012 |
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The Department for Energy and Climate Change (DECC) consultation into the Green Deal and Energy Company Obligation (ECO) has recently closed, but had virtually no reference to mortgage lenders within it.
The lengthy consultation document - of almost 250 pages - contains the word ‘mortgage’ once and ‘lender’ not at all, giving the impression that lenders are deemed unimportant in the world of the Green Deal – a point which the BSA makes in its consultation response.
The Green Deal is a Government initiative aimed at improving the energy efficiency of Britain’s buildings by providing a means for owners and tenants to make green improvements.
The scheme works by allowing homeowners to make improvements to their home, for example internal wall insulation or double glazing, and pay for the cost of the work through their energy bills during the lifetime of the installed measure.
Running throughout the Green Deal is ‘the Golden Rule’, that consumers must make a saving on their energy bills from the green improvement which is greater or equal to the cost of installation. So essentially, the Golden Rule ensures that the customer is better off financially from improving the energy efficiency of their home – or at least no worse off. The loan for the improvements is not secured against the property; instead a charge will be secured against the energy bill, meaning that it passes on to future occupiers.
Sitting alongside the Green Deal is the ECO which will make energy companies responsible for helping to tackle fuel poverty and deal with hard to treat homes. The ECO requires energy companies to help fund energy efficiency improvements which do not meet the Golden Rule – but initially will mostly be solid wall insulation.
All in all, the Green Deal consultation is a missed opportunity to involve lenders in helping consumers to make improvements to their homes – a key role for building societies and mutual lenders. Some homeowners may wish to pay for improvements to their home up-front rather than adding on payments to electricity bills for the foreseeable future and we urge the Government to consider whether the possibility of taking out a further advance on a mortgage can fit within the Green Deal scheme.
The BSA's full response to the Green Deal Consultation can be viewed here.
