No new market needed to fund improvements in home energy efficency says Ray Boulger at John Charcol

Gordon Brown, Budget speech 2007:

"Having already announced measures to speed up home insulation and to design out energy wasting products, I have been consulting with the major banks and building societies and encouraging them to create a new market - mortgages for immediate capital investment in energy efficiency that cuts consumption and cuts bills that in the end not only pays for itself but increases the sale value of the home." Commenting on the statement above, Ray Boulger, Senior Technical Manager at leading independent mortgage broker John Charcol says, "I was surprised to note that The Chancellor considers there is a need for a new market as outlined above.

A new market is most definitely not needed because there are already plenty of products available that can accommodate what the Chancellor is trying to achieve." Available products: Instead of a 100% mortgage to buy a property a borrower could choose a 100%+ mortgage.

Instead of a sub 100% mortgage to buy a property a borrower could simply choose a higher LTV.

For existing homes the owner could in most cases get a further advance or borrow extra when remortgaging.

As a last resort if neither was available or appropriate a second charge mortgage (also euphemistically known as a secured loan) could be considered, but this would normally be more expensive and therefore in marginal cases it may not be economically viable to make the investment to enhance the energy efficiency of the property.

Boulger continues, "All of these options for a new mortgage are available on a flexible basis or with a drawdown facility and so the funds required would not need to be drawn down, and hence interest incurred, until required.

"As a further advance would by definition have to be obtained from the existing lender, there may be less flexibility to draw the funds down in stages.

This wouldn't normally be a major problem however, as most of the work being undertaken would be completed fairly quickly and so the funds would probably be required at one time anyway.

"The above options all assume the borrower has sufficient income to satisfy the lender's criteria.

In cases where the borrower was already obtaining the maximum mortgage based on their income I can only presume that The Chancellor would not want to encourage irresponsible lending, by asking a lender to increase the maximum facility just because the funds were for something he wants to encourage.

"Previous examples of this Government trying to micromanage the mortgage market include CAT standard mortgages and encouraging lenders to offer 25 year fixed rates.

The latter have never taken off and only Nationwide and HSBC really embraced CAT Standard mortgages, although several other lenders offered a token CAT product, no doubt with political correctness in mind.

Most lenders quietly dropped their token CAT standard mortgage because sales were so minimal (surprise, surprise) and even the lenders who embraced CAT mortgages have since dumped most of them.

Some lenders will offer a "green" mortgage, but there is no point in reinventing the wheel.

Therefore I expect most "green" mortgages to simply involve adding a token feature or putting a marketing spin on an existing product.

Most "green" mortgages are likely in due course to go the same way as CAT standard mortgages." Borrowers keen to see how much they could save on their mortgage repayments should either contact John Charcol on 0800 71 81 91 or post a copy of their existing mortgage offer marked clearly "Remortgage Check" to John Charcol, Holbrook House, 10-12 Great Queen St, London, WC2B 5DD.

This service is obligation free and consumers are in no way required to act upon the recommendations given.

Borrowers should contact 0800 71 81 91 or visit www.johncharcol.co.uk For further information, please contact: Ray BoulgerSenior Technical Manager020 7611 7072 / 07977 277431 Drew WotherspoonHead of Communications0845 413 1010 For general press enquiries please also contact: Helen Thomson / Susannah Walker-RobsonLansons Communications020 7294 3604 / 65 If you transact business through John Charcol, we may charge a broker fee of up to 1% of the sum borrowed for regular applications (No broker fee payable when bought online through www.johncharcol.co.uk).

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