Buyers should be given ‘larger mortgages on greener homes’

Homebuyers could get bigger mortgages if the energy efficiency of properties were part of the lending criteria of banks and building societies. That’s according to new government-funded research, which found […]

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By Priyanka Shrestha

Homebuyers could get bigger mortgages if the energy efficiency of properties were part of the lending criteria of banks and building societies.

That’s according to new government-funded research, which found while 90% of mortgage lenders use cost data from the Office of National Statistics, which include fuel bill data, no known affordability calculation takes direct or indirect account of the energy efficiency.

It adds if the A-G rating of the Energy Performance Certificate (EPC) was part of the calculations, a higher efficiency rated home could amount to £4,000 in additional mortgage finance.

That could increase to up to £11,500 between the most energy efficient and least efficient properties.

The report by the Lenders group, which includes Arup, Nationwide Building Society, the Energy Saving Trust and UK Green Building Council (UK-GBC), states even if buyers did not borrow the extra money, the process may have a behavioural impact, influencing their “perception of value” implied through higher borrowing limits.

Richard Twinn, Policy Advisor at UK-GBC believes if lenders use information about a property’s energy performance when making lending decisions, it could encourage homebuyers to choose more efficient properties by increasing the size of mortgage available.

Last year, a total of £233.7 billion was lent to first time buyers, home movers, those re-mortgaging and buy-to-let landlords.

Claire Perry, Climate Change and Industry Minister said: “This report and its findings are a timely and valuable contribution that could improve the robustness of mortgage affordability assessments based on household energy costs. This could allow energy efficiency to be better reflected in mortgage lending practices and has the potential to lead to new forms of energy efficiency finance.

“With their existing relationships with millions of customers, mortgage lenders are well placed to support energy efficiency improvements to the nation’s homes.”