Energy efficiency will count during lender affordability checks

Energy efficiency chartIn a bid to encourage greener properties, new Welsh help-to-buy loans are set to take in to account the energy efficiency rating of new-build homes worth up to £300,000 in Wales. This will mean that many homebuyers should find it easier to take out larger mortgages when purchasing an energy efficient property.

Lenders could increase loans by £11,500

Recent research by the Building Research Establishment (BRE) found that when the energy efficiency of a home is taken into consideration during affordability calculations, lenders could increase loans by around £11,500 due to the electricity and gas bills being considerably lower.

This theory will be put to the test from June onwards, when Welsh help-to-buy loans will start taking the energy efficiency of the property into account.

Looking to the future, this could potentially help all buyers and sellers alike if it’s ever rolled out to all homes, as it would make securing a loan easier if the property is energy efficient, regardless of how old the property is or how much it’s worth - but this is a long way yet from ever becoming a reality.

Government and researchers hopeful lenders will play their part

This new scheme is one of several innovations being discussed to help further encourage energy efficiency, alongside the possible introduction of tax cuts for greener properties.

The Welsh government believes that this change should help more people take their first step onto the property ladder while encouraging buyers to consider the energy rating.

Rebecca Evans, Wales’ housing minister, said that the Welsh government hope to see lenders assist these efforts for a greener Wales by making energy efficiency a part of the mortgage consideration for all homebuyers across the country.

Following the research findings, the Building Research Establishment said it hoped banks and building societies will now appreciate the importance of factoring energy use into lending decisions.

Lenders have been too nervous to act first

BRE’s group associate director, Andrew Sutton, says his primary hope is that action is now taken by the mortgage industry. Lenders have been aware that there was a growing argument to factor energy efficiency into lending decisions, but they have been nervous about making the first move and understanding the costs of implementing the changes.

Barclays have been one of the first lenders to offer a green mortgage product, offering borrowers a discount on interest rates when a new-build property is rated in one of the top two energy bands.

Sutton also said that there is big potential for existing homes. As an example, if a homeowner wanted to borrow £10,000 on their mortgage for a loft conversion they could potentially borrow more if the work they undertake includes insulation that takes the property from an E-rated home to a C-rated one.

New incentives and policies have been discussed

Other potential incentives have been discussed in the past to encourage homeowners to improve the energy efficiency of their homes, including things like lower stamp duty and council tax discounts for greener properties.

Richard Twinn, senior policy adviser at UKGBC, believes that although the Welsh green mortgage scheme is hugely important, lower stamp duty would be the real gamechanger as it’s the single most effective mechanism the government can use.

The government is set to announce new policies later in the year that they hope will encourage homeowners to make the required changes to make their homes more efficient. However, Twinn has warned against holding high expectations, saying small trials were more likely to be the way this is addressed, as opposed to a “big bang” on stamp duty incentives.

If you’re looking to buy or sell a property in Cardiff, then don’t hesitate to get in touch with us today. We’re experts on the Cardiff property market and have a knowledgeable, friendly team that can help you every step of the way. Please contact us on 02920 668585, or by popping into one of our three Cardiff branches in Roath, Cathays and Cardiff Bay.

23 May 2018


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