Follow the Advice ep7 - Alan Kent

Alan Kent is the director of Viable Mortgages, a sustainable mortgage advice firm. He helps clients with traditional mortgage finance protection and offers specialist advice on ethical preferences. Alan is also a qualified retrofit assessor, which involves making homes more energy efficient and improving their overall wellbeing. Around 80% of homes in the UK will require retrofit work, including both traditional and modern properties. In the future, mortgages for less efficient properties may become more expensive due to changes in finance emissions. The goal is to decarbonize UK housing stock and improve the general wellbeing of clients. Funding and grants are available to make retrofit more accessible to a wide range of people. Energy efficient homes also have higher value in the market and can lead to better mortgage options. Hello and welcome to the Follow the Advice podcast. I'm David Brown. In this episode, I'll be talking to Alan Kent, who is the director of Viable Mortgages, a business that he set up in the summer of 2023. They're a sustainable mortgage advice firm. So as a mortgage intermediary, Alan helps clients organise traditional mortgage finance protection, but he also offers specialist advice around any ethical preferences that clients may have. Another interesting aspect of Alan's business is that he's also a qualified retrofit assessor. And if you're not sure what that means, then listen on, because I'll be asking him about that during the interview. I really hope you enjoy listening to this one. So Alan, welcome aboard. It's great to have you on the podcast today. You have a really interesting combination of things going on, right, which we'll get into as the conversation progresses. But I know that retrofit is a word that people out there might not be totally familiar with. So I wondered if we could start by just you telling me exactly what that is, if that's okay. Of course. Yeah, thanks for having me, David. So retrofit is the process of making a home more energy efficient, adapting it from a health perspective as well, so that it can help improve the general wellbeing of the home for everyone that lives within it. Energy efficiency just helps save clients money as well and helps them with the sort of independence aspect of being risk reliant on the credit or the government, even healthcare providers, if you think of it that way as well. The viable mortgages started off as a way to link the finance and retrofit, so they're pretty much in a situation where with the changes that are coming over the next probably three to five years, we'll start to see a massive change in both finance and emissions, which is where costs will be driven upon how energy efficient homes are and how less carbon intensive they are. So the balance between the two is generally thought to help with the decarbonisation of the UK housing stock, but in improving the homes for the maximum benefit of the clients as well. Okay, that's cool. That makes sense, Alan. Thank you. And so what kind of people or what kind of properties typically would you see that have a need for retrofit? Yeah, so many properties within the UK, there's expected to be about 80% of the homes that are in the UK just now that are going to need some form of retrofit work done to them. These could be minimal sort of changes that would improve the energy efficiency, but you'll find it will be mainly traditional built properties are the worst affected at the moment. But even more modern construction properties like timber frames and cavity walls will still need something done. It may even just be like renewable technology that reduces the impact of life on the grid. There is some new technology which is likely to be installed in a lot of homes in the UK, which is called mechanical ventilation heat recovery systems, which is where that improves the general air quality of the home as well. So there's many things and many different types of properties. So it's probably hard for me to just pick one and say that's the most unique and the most affected. But yeah, there will be really any potential client will have the ability to do something and it will just save money and potentially improve the general well-being of the property as well. If I picked you up correctly earlier, Alan, I think you said that things like mortgages are going to be more expensive in the future for less efficient properties. Am I understood that right? Yes, it's hard to give a full breakdown of what essentially will change, but to give you a concept of what's happening in the background, you've got what's called financed emissions, where banks and anyone that pretty much provides capital money lending will start to charge more for anything that's more carbon intensive. Part of the whole net zero push to sort of decarbonise the planet, help with climate change. The sort of finance emissions side of things is driven by a scope reporting, which is the new greenhouse gas emissions framework where bigger organisations will have to have the ability to look at what's called a downstream and also as well as the upstream, which is essentially retail mortgages is effectively going to be driven by those changes. So it's all a work in progress as now. You've got many, many groups that's all trying to drive the most positive changes that can help everyone. And obviously the main focus here is to just help educate clients as much as they can about the changes that are coming, what they can do just now to prepare and then obviously take it from there. I'm listening to you and I'm only hoping that my mortgage is paid off long before that becomes a reality. I think that might end up being a bottomless pit. So Alan, tell me about, there must be some unusual properties you've visited or seen in your line of work. I'd love to hear about one or two of those. So in terms of properties I've visited, to be honest, I've visited some of the most beautiful parts of Scotland. It's been a whirlwind of a journey over the last 12 months, looking at all the different properties that are affected and potentially getting retrofit work done to them. So I can remember a property down in the Kintyre coast, which overlooking some of the most beautiful scenery, but was going to have to have some of the most intensive retrofit work to bring it up to a significantly higher spec. If you look at an EPC just now, it's a G-rated property and the jump with all the work once it was done was going to improve, if it's EPC, up to a B, which is a significant jump, especially for the costs. It's thousands upon thousands of pounds of the property cost to run on a yearly basis from an energy point of view. And that was going to significantly reduce with that jump in the sort of savings. One of the things that interests me about this, Alan, is, as an outsider looking in, it seems to me—that's only my take on it—that affordability is a big factor in this whole sector and that there seems to be a big investment needed in order to—in the example that you've just given—bring homes up to a more efficient level or up to scratch as such. Am I right in thinking that? And if I am, what can we do to make this more accessible for people? Most councils just now have all launched a local heat energy efficiency standard, if I remember that correctly. Effectively, it means that it's a consultation process that they're all going through to look at what help and support can be done to help drive the changes that are needed within the homes within the UK. The plan with the Scottish properties is certainly to look at improving the EPC up to a minimum of C by 2033. There will certainly be investment needed from the client's perspective, but also there could be some sort of co-joined grant funding support to improve the property as well. It's still very much a work in progress, really, if the client is at a point where they want to look at it from the point of view of what to get in a saving from the energy efficiency changes that they do to the property. There is also the other value of improving the health and general wellbeing of the occupants so that they're potentially working more efficiently and doing more things. They're improving their livelihood by having more engagement relationships and not feeling that they're stuck at home or that they're able to go and do more things in the community and play an active part, because their general wellbeing has been improved as well. In terms of the example that I gave to you a moment ago, that was a massive investment for that property, so it would take a number of years before you'd start to make any of the money back. There can be small changes that people can do that can massively save money, but can also improve the property as well. Then it comes to things like the value of what an energy efficient home has to a non-energy efficient home. When it enters the market, you get two properties in the same street, one with much more energy efficient standards than the one that doesn't, and you're the buyer and you're looking to see which one is going to save the least amount of money when it comes to energy costs. That demand is just going to increase its value. It's based on the number of homes in the UK, and we don't have enough, so it's hard to pinpoint. I don't believe that RICS has put down any guidance for surveyors to say what the changes are going to do in terms of the value, but ultimately it's going to be driven by the consumer at the end of the day. They know they're going to save £2,000 a year in energy costs, just as an example, on one property against another property. They're going to pick that property and it's going to be more in demand. Equally, on the mortgage side of things, you actually get better mortgages just now. You also get underwritten easier if your home is more energy efficient, and you can borrow more money. There are benefits all around that more energy efficient homes just helps everyone. I can't help but think, and this is fascinating stuff, as I listen to you talk about getting a return on the investment and stuff, it seems to me that the model here is a big investment up front and then you recoup that over a period of years as you get the benefit through bills and stuff like that. I suppose what I'm wondering is, is this only for the wealthy, Alan? I'm interested in your take on that. That's a really good question, David. You will find that there's quite a wide variety of people and it's quite keen to get work done to their property. The fortunate thing is there's quite a lot of grants that are available, which means that people can get a contribution towards the costs and in some cases actually get all of it paid for them as well. That can be homeowners, it could be tenants, so really it's about making sure that if you are eligible then we try and use that as much as possible. The more likely option and one of the ones that's going to be the most popular moving forward is people either financing it through savings or in most cases adding on to a mortgage, which is where you get better mortgages with the more efficient your home is just now, where adding on to the mortgage if you're putting a significant investment in the home, most people would rather spread that sort of cost out over a longer period of time. You will pay more interest if you do that but it's obviously less on a monthly basis, so if you're saving money on the energy costs then you're essentially saving the money on the mortgage or the finance costs of it. Ultimately it's making sure that if you're doing anything it's the right thing for the individual. In the south east of England we've started to hear that there's quite a wide amount of people looking to do now not just refurbs but actually retrofit refurbs, where they look at the tightness of the property, what insulation measures can be done at the same time as them doing all the aesthetic work that can essentially improve the layout and make it as attractive and nice as they want it inside. But equally the actual retrofit side of it is getting done in conjunction with it and that can also include like renewable technology so that the properties like annual costs for running it is kept at a minimum. Similar to potentially going to a gym, if you think about eating healthy and going to a gym you might start to feel the benefits slightly to begin with but it's building that sort of habit over a long period of time that allows you in the future to live longer, that also means that you'll live healthier and hopefully avoid long-term illnesses but your general well-being improves. It's the same with the home, if you invest in a home and make it as energy efficient as sustainable as you possibly can, you're reducing your impact on the grid, your impact on the planet and you're saving yourself some money in the long run as well. Does that make sense? Yeah of course, yeah it does and Alan I'm interested in I guess bringing the conversation close to your business in the sense of when I first researched what you do, it seems to me the combination of the practical consulting that you do on the home itself, the combination of that and then the financial advice that goes with it, that seems like quite an unusual and well I don't know if it's a unique combination but I wanted to ask you about that, is that a new niche that's emerging? It's certainly from my perspective, I'm the only person I know in the industry that's doing it, but certainly it's a total niche, everything is all just now the consultancy side of things about helping to improve the property but also getting the best finance and I've got my regulatory obligations as well, if clients want to come to me and don't have any sort of ethical preferences or they're not really too concerned about energy efficiency changes, then I'm still helping them as much as I can and getting them the best possible finance and making sure that they can get potentially the most borrowing to buy this new home or maybe it's to just get the lowest interest rate on a remortgage or do some improvements and do some capital raising to build a garage, so everything I do is all driven by needs and preferences, so clients will dictate to me what they feel is the big priority and I make sure I get that put in place for them. I mean it's been a crazy time hasn't it, the last two or three years for the financial markets and interest rates and mortgage and all that stuff, so I'm going to put you on the spot now, what's your outlook for the mortgage market over the next say two to three years? Two to three years, that's a long time in the world of mortgages, I'd love to give you a hundred percent answer, it appears based on some of the headlines and reports and inflation is starting to become under control so we should see the base rate steady off potentially start to fall, some reports said towards the end of this year, I heard some predictions, but obviously we didn't see any change so far, I don't really think it's my personal opinion, I don't anticipate it's going to change anytime soon, possibly post-summer once we start to see inflation come down, really the market's there, as much as it changes, the low interest rates are probably a thing of the past, it's probably something that's great while it's there, we're realistically back to what was considered a sort of normal sort of market previously, so having rates within the sort of three to five ranges, generally you'll find that the market changes and it just adapts as time goes on, so really if clients are concerned about it, then there's no reason to hold off, if anyone wants a conversation about what is my options just now, then all they need to do is just speak to an advisor, we'll go through a bit of a whole budget planner, discuss what priorities they've got, what sort of long-term goals that they've got to pretty much get into the property ladder or maybe on the property ladder looking at that next step, then we can just give them some guidance about how things are just now and then they can plan accordingly on what they feel is the bigger sort of aspect of what they want to do. It's good advice and I'm now braced for needing to save for when my own fixed rate expires next year. It doesn't sound like it's going to be particularly affordable for what you just said if rates don't come down. What are you on just now? I don't remember. Oh well, most people do see a bit of a jump in that range just now, it's just that sadly it's the way it is, the market does change. To me, we're fortunate that we can use any lender that's going to offer us a mortgage to get our clients the best possible mortgage available, so it's always the key thing that we'll look at what our existing lender offers you as a client to stay with them. Some will be more keen to try and offer you an attempt to stay with them with incentivised mortgage rates, others won't be so keen, so moving to a new lender is still easy enough. With digital technology these days, it's easy enough to move to a new provider, fairly straightforwardly. I was being lighthearted before, but I am going to come out, and there will be many people like me, I'm sure, I'm about to come out next year with a five-year fixed rate. Now, five years ago, I don't remember what the rates were, but it was two something, as I recall. It's a serious point, there will be people who could be in for a nasty shock, so how early should we start planning ahead of that rate change, Alan? Typically, six months is a good time to get yourself prepared. If you feel that there's going to be a significant payment shock, then speak to someone before the significant payment shock. What I would always recommend clients to do, and even clients that feel that they're in a more affluent position after the end of five years, is to start paying a wee bit more before they come off the fixed rate, so that they're starting to become acclimatised to the higher interest payments, or the higher payments on the mortgage, so that if they're going from, let's just pick a number, say they're paying 750 just now per month, and their new payment is going to be about 900. When they took out that 750 payment, their salary has gone up 13 times since then. They could be paying more than what they're paying just now, based on the budget plan and expenses that they've gone through. Just gradually make that jump for a couple of months, push it to 775, a couple of months later, push it to 800, a couple of months later, just keep pushing up gradually. Generally, just make sure that you're forcing overpayments on your mortgage before you do that. Most mortgages will have a 10 per cent overpayment facility, so those small amounts you're paying extra just allows the person to make sure that they're in a comfortable position when it does come. If rates drop before they finish, and say as next year's rates have plummeted again, then they're in an even better position, because they've acclimatised to the higher payment. It's not been as much, so they could, in effect, drop their mortgage term if they wanted to, and just keep paying what they've become acclimatised to. Yeah, that makes sense. So, this is a relatively new venture for you. I know you started in the summer of 2023. You said yourself it's a unique proposition in the market. I'm sure it won't be long before others copy you, so good luck fending off the competition, but how's it going for you, Alan? I know it's early days, but how's it all going for you? Yeah, it's very early days. The retrofit side is very, very busy. That appears to be the biggest and the fastest-growing sector, certainly within home improvements on the retrofit side. So, as a retrofit surveyor, it allows me to go out and look at properties while also timing in any mortgage appointments at a time that's convenient for the client as well. So, yeah, it's a bit of a whirlwind. It's the early days, as I say, and we'll see how things progress. On the mortgage side, I've just left everything to grow organically. The plan will be this year to start to really put in a bit more positive in business development and actual paid for advertising just to help build the sort of brand awareness, but lots of good relationships have been built, which is excellent. That's what we need in any sort of business venture. Also, on the retrofit side, I've incorporated that as a separate limited business as well so that there are big aspirations moving forward where that can actually grow into a massive business, which will link well with the sort of viable mortgages as well. So, they'll work together perfectly based on the sort of dreams. Again, that's probably a podcast for a future date. Yeah, maybe. So, this podcast, Alan, is about showcasing people involved in the financial advice sector and many people like you, young entrepreneurs who've decided to take the plunge and set up their own business either recently or not so recently. So, I guess I'm really interested in what was your motivation for doing it and setting up your own business, Alan, when you did. So, setting up on my own has been something I've always thought about. So, I've been in a position where I've always wanted autonomy and freedom of having a business where you're in control of making the decisions or at least applying a lot of bad influence on partnerships and relationships with other key investors or people that's involved in the whole transaction. So, it must have been 2021. That was when COP26 was. I started to really take a big focus on sustainability because I've always felt quite passionate about environmental benefits. I'm a swimmer myself, so you keep an eye on blocks and rivers and you can start to see a lot of pollution that's gone into them. It's something you always feel quite strongly about, especially with the endangered animals where you feel that there's lots of changes in the planet that's affecting animals who are just habitable to the planet as well, which, again, all kind of linked in with my own core values. So, I studied the Green Sustainable Finance Qualification with the Chartered Bankers Institute, which really optimised all the changes that are coming and effectively gave me the knowledge and the insight into what is going to be coming over the next few years or at least until we reach 2050. So, I'm like, well, it fits in exactly with my core values and I've got great experience in mortgage brokers, so what else should I be doing? That just links in nicely with everything, my knowledge and core values, and I felt, well, this is probably what I'm going to be doing for at least the next 10, 15 years and see where it goes after that. Yeah, good for you and, of course, I wish you good luck with it. So, you mentioned swimming. What else do you do, Alan, when you're not doing retrofit advice or mortgage advice? Well, I do love exercise, so I enjoy out walking. I love to read, listen to audiobooks, spending time with my family. I've got two beautiful daughters who I spend as much time as I can with, taking them out places, just at least time sort of memories for them so that when they're a wee bit older, they've got the same sort of ethos and mindset to do the same thing as any grandkids I might have or kids they have in the future. So, yeah, that's the sort of, it's probably the balance just now sometimes, but that's a challenge. Yeah, absolutely. So, what things keep you awake at night? Right now, trying to set up two businesses. That's probably the biggest thing. Last night, I woke up at three o'clock in the morning with a great idea about how I can build the sort of retrofit side of things, and I got on my iPad looking at different things. But, yeah, that's probably the main thing. Just now, I don't do that much exercise. I kind of sleep with ease, to be quite honest. So, it's one of those areas. It's just getting the balance right between everything. So, you're getting the benefit of your health, making sure that you're looking after yourself, putting that investment in, as we spoke about earlier, about your future life so that you've got that sort of benefit there, but also just making sure that you're doing as much as you can to enjoy life just now. That's the biggest challenge. That's what it's all about, right? Yeah, definitely. So, that seems like a real positive note to start to wrap up on, Alan. You know, I wish you every success with both sides of the business and getting those up to scale. I know you've got big ambitions for the future to be positioned as number one in the UK in this niche. So, of course, I wish you well with that. It's been great talking to you. I've thoroughly enjoyed it. You're right. Maybe there is a podcast to come in the future, as we know more about some of these changes. It would be great to potentially share some of that stuff with you in the future, too. Excellent. All right. Many thanks for your time, David. Well, I hope you enjoyed listening to my chat with Alan, and if, like me, your fixed-rate mortgage is due out soon, then I hope you've dug out your papers already. You've been listening to Follow the Advice. If you'd like to get in touch with me, you'll find me on LinkedIn. Just search for David Brown Problem Solver. You can listen to other episodes of the podcast on audio.com, and if you'd like to check out my video content, you'll find me on YouTube at Skoosh Consulting. That's S-K-O-O-S-H. If you want to know what that means, visit my website at www.itsaskoosh.com. Thanks again for listening, and I hope to see you all soon.