Homebuyers could borrow more with better forecasting of energy bills
More accurate assessments of home energy bills by mortgage lenders could vary loans by up to £11,500 between the most energy efficient properties and the most energy hungry homes, according to a new report published today by a consortium of industry experts, including the UK Green Building Council (UK-GBC).
The LENDERS project set out to demonstrate that improved analysis of the likely household energy costs could improve mortgage affordability assessments and potentially allow mortgage borrowers to access a larger loan on their home.
Funded by Innovate UK, the project looked at data from 40,000 homes and successfully demonstrated and modelled the link between energy efficiency and household fuel bills. The project team has created a new consumer calculator www.epcmortgage.org.uk to demonstrate the cost benefits of fuel efficiency, enabling would-be buyers to see the benefits of energy efficient homes.
Richard Twinn, Policy Advisor at UK-GBC, said: "Energy bills are one of the largest costs associated with running a home. But, most homebuyers don't typically consider energy efficiency when they're making decisions about the right property for them.
"This new research shows that if lenders use information about a property's energy performance when making lending decisions, this could encourage home buyers to choose more efficient homes by increasing the size of mortgage available for these properties."
The project – which includes Arup, BRE, Constructing Excellence Wales, the Energy Saving Trust, Nationwide Building Society, Principality Building Society, and UCL Energy Institute - hopes that offering those searching for a home the potential of more money if they buy a lower energy home will shift buying habits towards lower energy homes.
“Over time this could provide a major driver to link energy performance with property value, and encourage homeowners to install energy efficiency measures in their own homes," added Mr Twinn.
Claire Perry, MP, Minster for Climate Change and Industry, said:
“This government is committed to making home ownership affordable for all. More accurate estimates of household energy costs could improve lending practices, lead to new sources of finance and increase energy efficiency across the country. That's why government funded this project through Innovate UK and looks forward to seeing the industry take action in response.”
The Lenders Core Report is available to download here.
Through WorldGBC, UK-GBC is working with Green Building Councils across Europe on the Energy Efficient Mortgages Action Plan (EeMAP) initiative. The initiative seeks to prove that energy efficiency and sustainability features in homes have a risk mitigation effect for banks, meaning that energy efficient mortgages will represent a lower risk on the balance sheet of banks and could, therefore, qualify for a better capital treatment, making them more attractive for banks. Click here for further information.