Lloyds to use energy efficiency in mortgage affordability sums
Halifax, Lloyds and Bank of Scotland will be using properties' EPC ratings when they calculate mortgage affordability, it has been announced.
The lenders, who are part of the Lloyds Banking Group, will analyse energy costs for homes and take this into account when processing applications. Those with the highest ratings of A and B – currently around 15% of UK homes – will see an increase in the amount the banking group is likely to lend.
It is the first mortgage lender to use a home's energy efficiency rating into account when calculating affordability. Borrowers who are purchasing a home or remortgaging will be impacted by the change as will existing customers who are moving to a new mortgage with Lloyds.
All homes being sold must have an Energy Performance Certificate (EPC) which indicates how energy efficient the property is.
Those with the highest ratings are most likely to have lower energy bills. Lloyds said this will have an impact on disposable income which is a strong indicator of affordability for prospective mortgage borrowers.
Amanda Bryden, head of Halifax Intermediaries and Scottish Widows Bank, said: "We know that typically, more energy efficient homes are cheaper to run. Using EPC data and energy bill analysis, we're able to reflect that in mortgage affordability."
Whilst those homes with the highest A and B ratings will see an increase in lending, those with the lowest rating – F and G – will see a 'small reduction' in the maximum loan amount, Lloyds said. Around 3% of homes are thought to be in this category.
Those in the C, D and E categories will see no change to the maximum loan amount
Halifax, Lloyds Bank and Bank of Scotland offer support for existing homeowners wanting to improve the energy efficiency of their homes through Green Living Rewards, which offers up to £2,000 cash back on a range of energy efficient home improvements.
They also offer a range of incentives on heat pumps, solar panels and insulation through partnership arrangements
About the author
Martin began his landlord journey 30 years ago, while working in an international role for a global telecommunications company. Since retiring he has extended his portfolio, which he manages with his wife, but has always focussed on the ‘small student HMO’ sector preferring to offer homes in the community for small groups to the more common ‘pack them in and take the money’ mentality. He has chaired the PDPLA for the past 12 years and has overseen the Associations transition from small local self-help group to a much larger and more professional institution which is recognised and listened to nationally. Alongside his PDPLA role, he also has leadership roles in a number of other local organisations – bringing his unique perspective, driving for change and increased use of technology while respecting the history that brought us here.