Solar mortgages, the Future?

This is a short report about solar mortgages and the effect it could have on the Environment, first time home owners and the Economy.
As the world is starting to run out of fossil fuels there is a need for an alternative energy source. One option is for homes and businesses to attach solar panels to their properties to supply them with fifty percent of their electricity or hot water requirements. This is a good alternative energy source; it is clean, reliable and depending on size can convert enough energy to run a home or business. Solar panels have been proven to work powering satellites and even a car! They have many benefits, for example they can reduce a home’s carbon emissions by as much as two tons. They can also add up to ten percent onto the value of a home.

Solar power has been proven to work on many occasions however it does have issues. The main one being the price, I found on average that the price of electricity supplied by a company is forty pounds of four hundred and eighty pounds P.A. The price of a solar panel large enough to supply a three bedroom house with fifty percent of its electricity requirements is nine thousand pounds; even though this is very expensive in terms of solar panels it is cheap, with the average solar panel costing around sixteen thousand. Buying a solar panel would be impractical for many people. The first reason being it’s too expensive. Many people can’t afford to spend large amounts of money when the return with the current energy prices is thirty eight years. This may be possible for a very small percentage of people however this is not possible for a large amount of people. One way of getting around the price of a solar panel is to take out a solar mortgage, this is where you purchase the solar panel with a mortgage from the bank and pay them back at a set rate over a number of years including interest. This raises issues of sustainability, house prices and mortgage rates are very high already. By adding more to this are we making it almost impossible for the younger generations to get onto the property ladder?

There are several technical solutions that could be used to resolve the issue above. The design of the solar panels could be re-evaluated to see if there is any way to make them more powerful without raising the prices too much. If this were possible the amount of electricity needed to be purchased from the electricity company would go down meaning more money could be used paying off the solar mortgage.
Another possible technical solution would be again to re-evaluate the design of the solar panel to see if maybe an ’economy’ version could be made, without compromising the power output or sustainability of the panel. By making the cheaper version it would cut the price meaning a lower mortgage would have to be taken out.

There are similarities with both technical solutions, they both mean that the solar panel design have to be re-evaluated so that the amount or time taken to pay back the mortgage is less.
The differences are also differences with the solutions. The first solution means that the solar panel may have to be more expensive however if they can convert more energy the time taken to pay off the solar mortgage would be less. The second solution means that a cheaper solar panel is designed; this brings the price down however it may also decrease the reliability of the solar panel. If they are unreliable the profile of solar power could be dragged down and made very unpopular. Both solutions are good however they both have implication which makes me think that the solution to the issue of sustainability does not lie with technical solutions.

The government is also affected by the fact that if solar mortgages are introduced at the current state of play it will make it even harder to get onto the property ladder than currently possible.

Political solutions could be used to resolve the issue of sustainability with solar mortgages.
The first thing that could be done is the government could market the solar mortgage idea and back it more than they currently are, putting into place advertisements and raising the profile of the solar mortgage as not many people have heard of it. If it becomes popular and lots of people take it up the price of the solar mortgage would probably drop meaning less of a mortgage would have to be taken out. This is a good solution as will cut the carbon emissions in Britain. However it does rely on people taking out the expensive mortgage at first so that when it becomes popular the prices drop.
Another solution is the government could offer an incentive to make people take up solar mortgages. For example a lesser council tax for those who own solar panels. I am aware that there is currently a government scheme in place giving incentive to purchase solar panels. However it should be made more mainstream, or changed so that more people are attracted to it.
These are both good ideas that I think should be seriously considered by the government. Fossil fuels are running out and the government needs to implement a replacement as soon as possible before fossil fuels run out and to cut the carbon emissions of Britain.

The issue with solar mortgages could have serious effect financially. If mortgage prices rise due to solar mortgages it will make it harder to make repayment meaning some people may even lose their homes. If mortgage prices rise it will also make it harder to buy a house meaning people will stay in rented accommodation. If this happens then it will have incrementing affect on mortgage rates, making them also rise. This would not be at all good as if mortgage rates rise again then people would be even less likely to get a mortgage meaning it would continue to rise in a vicious circle, causing serious economic damage.

At the start of the article I asked if solar mortgages are implemented will it make it harder for the younger generation to get onto the property ladder. I think the answer to this question is yes. With the current mortgage rates and prices of solar panels, we are making it very difficult for prospective buyers to get a mortgage and be ‘Green’.

As it stands the average price of a three bedroom house is around two hundred thousand pounds, in the south of England. The mortgage rate at this time is around six to seven percent This is not so bad at the moment however if the extra mortgage for solar panels is brought in and rates where to rise it could make purchasing a house in the south of England very difficult. This would have a personal affect on me as I someday plan to own a house in the south of England.

The graph below shows interest rates when they hit a peak from 1982-1983 if this were to occur again with the current size of mortgages people are taking out and with solar mortgages first time buyers and even others would be in a lot of trouble, with some maybe even losing their homes. This would not be acceptable; however this is only a worst case scenario.

To conclude I think that solar mortgages are a very good concept, however at the moment they have many downfalls mainly being down to price. If this could be overcome maybe using my suggestions above solar power and Mortgages would prove very popular. As stated if solar mortgages were brought into full fluxion at the moment with the current prices of houses first time home buyers would find it very difficult. The solutions to this are the design of the solar panels should be re-evaluated to make them more cost effective, The government should back the idea by offering incentives to buyers that supplier their homes with solar panels. If these two solutions where implemented the price could come down and the popularity would rise. This would make the solar mortgage less of a financial risk helping younger generations obtain their first property.

References
• http://moneycentral.msn.com
• Currys to stock solar panels- an article in the guardian 31/7/06 Mark Tran
• www.moneysupermarket.co.uk
• www.southernelectric.co.uk
• Southern Electric Monthly bill.