ERC Guide to Support Retrofit Lifetime Mortgages

In consultation with the Green Finance Institute (GFI) and Council members, The Retrofit Lifetime Mortgage Guidance is designed to support product development and act as a starting point for broader discussion within the industry as providers seek to adapt to the changing demand from customers.

Encourages innovation and good practice

Responding to an ageing housing stock and ambitious net zero targets, the Council hopes that the guidance will help move the conversation on green home finance forward.

The rising demand for more energy efficient homes presents a significant growth opportunity for the equity release market.

A tailored retrofit lifetime mortgage proposition, supported by customised advice, can support a new customer demographic who previously may not have considered equity release.

This approach enables advisers to engage with a broader pool of customers and encourages lenders to develop products with attractive and unique selling points.

As well as defining good practice, ensuring protection for customers and providing guidance for advisers, the guide also outlines what brokers and lenders may need to consider to ensure any new products deliver meaningful carbon emission reductions.

Model customer journey

Within the guidance, the Council has proposed a customer journey for the process of taking out a retrofit lifetime mortgage.

This differs from the traditional lifetime mortgage journey with the addition of an initial retrofit assessment and a retrofit coordinator to support the delivery and validation of the completed works to deliver intended carbon reductions.

These extra steps are designed to safeguard the customer and to ensure that all green property improvements meet high standards.

All equity release lenders are being encouraged to review the guidance and use this information to guide the establishment of propositions or add to current conversations they are having on the development of retrofit products; ensuring products meet the needs of customers now and in the future.

Kelly Melville-Kelly, Head of Risk, Policy and Compliance at the Equity Release Council, comments: “As the representative trade body for the equity release market, we want to champion its potential and ensure that it continues to meet the needs of as many customers as possible.

“We hope that the guidance we’ve outlined can help to accelerate efforts to innovate in the later life mortgage market and deliver a decarbonised housing market which future generations will benefit from.

“It is essential that we all play our part to reduce the carbon footprint of our homes and retrofit the UK’s ageing housing stock. As well as reducing carbon emissions, using equity release to make green home improvements can also lower customers energy bills, future-proof their home and even add value.

“Within the guidance we have also outlined example best practice for the industry and a proposed customer journey, to ensure that the necessary expertise and advice is given to customers throughout the process.

“We understand that product development takes time and entering new markets requires significant investment but it essential that as an industry we continue to innovate and evolve to meet the changing needs of consumers.

“We hope this guidance starts a sustained conversation which will see more firms consider their approach to green home financing while maintaining the high standards seen across the equity release market.”

Rachael Hunnisett, Associate Director for Built Environment at the Green Finance Institute (GFI) added: “The Equity Release Council have a proven track record of setting high standards which lead the market, protect consumers and give a voice to the sector it represents.

“We have worked closely with the Council to develop their retrofitting standards, closely mirroring the GFI’s Green Home Finance Principles which provide integrity to the green home finance market.

“By working together, we ensure consistency across the market and a focus on driving private capital towards solving the UK’s £250bn funding gap for improving the energy efficiency of homes.”