Using EPC in mortgage calculators could allow buyers to borrow thousands extra cash, report says

Many homebuyers would be able to take out a larger mortgage if the property’s energy performance rating was factored into the lending criteria of mortgage providers, according to new research. 

The LENDERS project has mapped how the energy performance rating of a house impacts on the energy bills of its occupiers. Currently, most mortgage lenders use cost data taken from the Office of National Statistics to inform their affordability calculators, which are then adjusted using occupancy, income and other profiles to estimate overall household expenditure, including the household’s energy bills. The LENDERS project found that if mortgage providers were able to more accurately estimate energy costs using the Energy Performance Certificate (EPC), then monthly savings from fuel bills in a higher rated home (equivalent to two EPC bands), could equate to around £4,000 extra mortgage finance. The report said that the difference in maximum borrowing amounts could vary by up to £11,500 when comparing houses of the same value at either end of the energy performance spectrum (comparing a property with an A rating on its EPC certificate with a property with a G rating).

Claire Perry, the government’s minister for climate change and industry said: “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. I look forward to seeing the industry’s response to this report.”

The LENDERS project was set up to analytically examine the link between property energy efficiency and fuel bills, and ways in which this link could enable homes with better energy performance to be able to demonstrate lower fuel costs in a way that can be passed on as a tangible benefit to homebuyers. The project partners are Arup, BRE, Constructing Excellence Wales, Energy Saving Trust, Nationwide Building Society, Principality Building Society, UCL Energy Institute and the UK Green Building Council. 

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