We’ve recently heard Kemi Badenoch, the leader of the Conservative Party, describe it as “impossible” for the UK to meet its net zero target by 2050, without either a significant drop in living standards or bankrupting the country.
That target - set in law by former Tory Prime Minister, Theresa May, in 2019 - commits the UK to cutting carbon emissions until we remove as much as we produce, in line with the 2015 Paris Climate Agreement.
Badenoch’s point is an interesting one - and perhaps a realistic one too. If we take stock of where we are in the mortgage market, I’m not sure many - if any - would say we’ve made as much progress on retrofitting as we’d hoped, except perhaps in the buy-to-let and social housing sectors.
The Private Rental Sector (PRS) still has some way to go, but does appear to be making progress, with some hope that all rental properties will reach an Energy Performance Certificate (EPC) rating of C or above by 2030.
The residential market however is a different beast entirely. With around 29 million UK homes still needing upgrades, the scale of the challenge is huge.
And the clock is ticking. The UK’s Climate Change Committee had stated residential retrofits needed to reach 500,000 per year by 2025 and one million per year by 2030 to stay on track for the UK’s clean energy targets.
Globally, the residential retrofit market holds significant potential for lenders and surveyors, with some estimates valuing it at around $65 billion annually by 2030. The opportunity is there - but without the right support, the UK risks falling behind.
Rewarding those already upgraded
While there’s certainly more choice in green mortgage products than there was a decade ago, many are still geared towards homes that already have a good EPC rating. This raises the risk of a two-tier market, where lending naturally leans towards properties that already meet higher energy-efficiency standards - such as new-builds - while older homes, which often require the most investment, get left behind.
UK Finance recently raised this point in its response to Government proposals to reform the EPC framework. While it welcomed the planned changes, it made it clear they can’t be looked at in isolation.
It argued that any reforms needed to be part of a broader plan that ties into the Government’s wider Warm Homes Plan - one that includes a proper Government-led delivery body, greater public awareness, financial support for homeowners who can’t afford upgrades, and investment in the supply chain to ensure the necessary skills and materials are available.
Without a joined-up approach, UK Finance warned minimum EPC requirements for lenders’ portfolios could lead to unintended consequences - namely, lenders focusing on ‘cherry-picking’ the best stock.
It also stressed the need to consider the potential creation of ‘property prisoners,’ particularly those on lower incomes living in homes that simply can’t reach an A-C EPC rating. As it warned: “Encouraging lenders to lend to high energy efficiency homes will inevitably create a favourable lean towards lending to new-builds, consequently disincentivising lending to existing properties in need of retrofit.”
Lenders have made efforts to drive retrofitting, introducing cashback offers and interest-free loans to support homeowners. Virgin Money, for example, offers up to £10,000 cashback for energy-efficient home improvements, while Nationwide offers loans up to £20,000 interest-free for up to five years to fund home improvements.
However, despite these incentives, progress hasn’t been as quick as some had hoped, and it’s hard to see that changing without Government funding. The reality is that many homeowners either can’t afford the costs or aren’t willing to take on additional debt, and without Government-backed support, large-scale improvements are unlikely.
Need for professional advice
Even where schemes have been introduced, the outcomes haven’t always been positive. It’s now estimated that around 250,000 homes are unmortgageable due to spray foam insulation - some installed with good intentions through Government initiatives, but ultimately causing more harm than good.
This shows how important it is for homeowners to get proper advice before making upgrades. That’s why the Royal Institution of Chartered Surveyors (RICS) introduced its Residential Retrofit Standard in 2024 - to ensure homeowners have access to expert, qualified professionals who can guide them through the process. As a firm with trained energy assessors, we understand without the right expertise from skilled retrofit assessors, well-meaning efforts to improve energy efficiency can backfire, leaving homeowners worse off.
That’s also why UK Finance is right to call for a joined-up approach and more financial support for those who simply can’t afford the upgrades. But with recent budget cuts, that’s looking less and less likely. Without a broader strategy, the housing sector - like the rest of the UK - may have to take a more realistic view on meeting those 2050 targets.
