A new report has concluded that more accurate assessments of home energy bills by lenders could vary maximum mortgages by up to £11,500 between the most efficient properties and the most energy hungry homes.
Part-funded by Innovate UK and involving a consortium of industry players, 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 home loan.
The project demonstrated and modelled the link between energy efficiency and household fuel bills. As a result, the team was able to create 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 efficiency homes.
The LENDERS project included the analysis of 40,000 sets of property data, and was undertaken by a consortium of partners: Arup, BRE, Constructing Excellence Wales, the Energy Saving Trust, Nationwide Building Society, Principality Building Society, UCL Energy Institute and the UK Green Building Council.
The partners argue that in the longer term, if this more accurate view of expenditure was used in lender affordability calculations, it could be reflected by increased mortgage lending to those with the most efficient properties. The report also suggests that the same change in forecasting could release thousands of pounds for those undertaking energy refurbishments.
Andrew Sutton, associate director of BRE, said: “Our research indicates that low energy homes potentially enable homebuyers to borrow more than those buying poor performing homes. Put simply, energy efficiency brings smaller energy bills, which if captured when calculating mortgage affordability could allow buyers to take out a larger loan.”
“The LENDERS project has developed a valuable tool that could help customers forecast their future home’s energy costs,” said Henry Jordan, director of mortgages at Nationwide Building Society.
“The work highlights the impact of home efficiency on fuel costs and presents a potential opportunity for lenders to support customer’s home and environmental ambitions and to improve the UKs energy performance.”
Claire Perry, MP, Minister for Climate Change and Industry, added: “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.”