Each week, Mortgage Solutions and its sister title, Specialist Lending Solutions, pick the top comments from our readers.
This week’s comment comes from: ERC ‘hopes to see innovation’ as it launches retrofit equity release guide to boost green lending, Melville-Kelly says
Andy Wilson, director of Andy Wilson Financial Services, said that it was “commendable” that the Equity Release Council (ERC) “should be considering energy efficiency in our housing stock”, but advisers need to “consider the funding of this in more detail”.
He said: “Firstly is the estimated time it takes to recover installation costs on typical energy efficiency improvements:
- Solar panels – £5,000-8,000 – 10-15 years
- Air source heat pump – £7,000-14,000 – 7-12 years
- Replacement windows – £4,000-10,000 – 10-20 years
- New boiler – £2,000-4,000 – 5-7 years
“Advisers will understand why borrowing money on a lifetime mortgage to install spray foam insulation is not a good idea.”
He continued: “Grants are sometimes available to reduce the initial outlay, but rarely will they be for 100% of costs, and the cynic in me thinks the new government may start to make them means-tested at some point.
“The average age of a lifetime mortgage applicant is around 70, but by definition that means many are older than this. Also, if they need to borrow money to do the improvements, there is a good chance they will not have sufficient income to service the interest charged on the mortgage. Consequently, the debt will rise with unpaid and added interest (which is allowed on this type of loan).”
Wilson said that this means that the “total outlay will be much higher over time”, so if £20,000 was borrowed at 6%, the debt would double in just 11-and-a-half years.
“If our 70-year-old lives to 93, it will have cost them £80,000. If they choose instead to pay the interest each month, over 11.5 years, the interest paid would be £13,800. Over 23 years, it would be £27,600. No amount of energy savings will get close to the costs,” he added.
“In all of this I have not, of course, considered how much warmer a home would be and the improvement in lifestyle – but at what cost?
“Looking to make the homes of our older population more energy efficient is a commendable aim, but advisers need to consider carefully whether their clients will actually benefit from using a lifetime mortgage loan to pay for it,” Wilson noted.
These comments are from our readers and do not necessarily reflect the views of Mortgage Solutions or Specialist Lending Solutions.
Anna is currently the deputy editor for Mortgage Solutions and editor for Specialist Lending Solutions. She has worked as a journalist since 2019, having secured her Gold Standard NCTJ diploma from News Associates in a fast-track six-month course.
She started her career as a report at specialist publication The Insurance Insider covering a wide range of areas before joining Mortgage Solutions and Specialist Lending Solutions in 2021.
In her role, she helps put together and structure the news agenda for the day and writes up press releases, reports, interviews, analyses and exclusives across both titles. She also commissions blogs for Specialist Lending Solutions and hosts online masterclasses and in-person events across the business.
She has been shortlisted for three journalism awards, which include BIBA Journalist and Media Awards Scoop of Year Award in 2020, Headline Money Mortgage Journalist of the Year Award (B2B) in 2022 and 2023.
Prior to being a journalist, Anna worked in ecommerce across Snow + Rock, Cycle Surgery and Runners Need websites, and before that worked at specialist financial PR firm Rostrum.
In her spare time, Anna enjoys reading, seeing live music, and cooking for friends and family. When she gets a chance, she also enjoys hiking, skiing and indoor rock climbing.
