Use EPCs to make better lending decisions

A major report commissioned today by the ‘Lenders Group’ concluded that ‘energy ratings’ of homes should be a factor in mortgage offers, which could let people borrow between £4,000 and £11,500 more, depending on the property’s Energy Performance Certificate rating.

In a move that Elmhurst has long promoted, the report suggests that homebuyers could take out bigger mortgages if energy ratings of homes were factored into the lending criteria of banks and building societies.

The report identifies that the current system of affordability is based on the Office for National Statistics data on energy bills, which is based on a smaller dataset of properties.

Effectively if a home is more energy efficient, the home owner will have more disposable income, and therefore the lenders will feel more confident lending more to them.

Elmhurst were trailblazers in this arena and back in the 1990s and 2000s (before EPCs) they worked with all the surveying companies to give tools to Chartered Surveyors to allow them to produce ‘Home Energy Reports’ on properties, in addition to the home buying reports and valuation surveys that surveyors carried out. Some lenders also promoted Green Mortgages and lent more to people in energy efficient homes.

Elmhurst contributed to this report as during the research we were asked to add our knowledge and deep understanding of the underlying energy data, to allow the Lenders Group to come to its own conclusions.

The Lenders group state:

 “That because energy bills were a sizeable part of borrowers’ essential expenditure, it was a component of the affordability calculation that warranted being made more sophisticated. However, it admitted that incorporating the changes would not be straightforward due to the complexity of lenders’ systems.”

“In the long term, we believe that the projects findings will act as a catalyst for the incorporation of energy performance linked fuel costs being a factor in lender affordability calculations.”

In the Guardian today: “Experts said the proposal could be a “major driver” in linking energy performance to house prices, and ministers called the work a “timely and valuable contribution”.

Stuart Fairlie – Technical Director “We at Elmhurst were delighted to help the Lenders Group in their project. 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.”


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