The Government funded report by The Lending Group has been looking at innovative ways to encourage the public to make energy efficiency improvements to their homes and making these homes more attractive to buyers.
The report suggest that homebuyers could take out bigger mortgages of those properties that have a higher EPC rating. This is because buyers of efficient homes will have more disposable income because of the lower energy bills and therefore afford the slightly higher mortgage payments.
Analysis from the Nationwide Building Society, Arup and other building groups have calculated the differences and suggests an extra £4,000 for A rated properties being compared to C-E rated properties and up to £11,500 extra compared to G rated properties. This would benefit the new build industry in particular as new builds tend to have higher EPC ratings than older building due to the stricter building regulations.
The report shows that most lenders look at the Office for National Statistic data on energy bills which is based on a small dataset of properties but does not reflect the efficiency of the property being bought. The new report examined data from 40,000 properties to fully understand how EPC ratings affect energy bills. This allowed them to see what could be afforded in additional mortgage payments to those that had lower energy bills.
There has been other suggestions in the past on how to link house prices with EPC ratings, one of which was a stamp duty discount for more efficient properties and was reported that ministers were considering the idea back in March 2016.
Elmhurst Energy contributed to the report to allow The Lenders Group to gain a deep understanding and interpret EPC data. Stuart Fairlie, the Technical Director for Elmhurst said :
“We have first-hand experience of home energy reports and EPCs during our long history in energy efficiency within people’s homes. We truly believe that any incentives that promote people to choose more energy efficient homes are good for everyone. The banks and building societies need to embrace ‘big data’ and use this to make more informed lending choices. We hope this and other incentives, like discounts on stamp duty for energy efficient homes, will start to get people think about the potential fuel bill of the property they intend to purchase. The reality is that for most families this is their largest bill after the mortgage repayment. By understanding the EPC and the valuable information it contains, everyone will be better off.”
However, The Lenders Group did admit that any changes like this are hard to implement due to the complexity of lenders’ systems.