Mortgage Eligibility Overhaul - should criteria include EPC ratings?

Research published by the Home Builders Federation shows that the new homes owners will save an average of £135 on monthly running costs under Ofgem’s new price cap.

And the HBF wants an overhaul of the mortgage lending criteria to take account of good (and bad) EPC ratings.

HBF’s ‘Watt a Save July 2023’ report finds new builds consistently achieve high energy performance levels, with 85 per cent being awarded an A or B Energy Performance Certificate, versus just four per cent of older properties. The analysis of government data also shows new homes use 55 per cent less energy and 60 per cent less carbon than older counterparts.

Now the HBF is calling on government to work with lenders to establish a proper market for green mortgages.

As it stands, most mortgage affordability assessments are based on the same energy bill assumptions, despite Energy Performance Certificates providing an indication of household running costs. Lenders will therefore apply the same assumed monthly expenditure to households regardless of the performance of the property they are purchasing. 

The HBF claims this is a missed opportunity to offer improved mortgage deals that incentivise environmentally conscious and long-term money-saving buying decisions, which would also support the next generation to realise their homeownership ambitions.

The report also looks ahead to examine the performance of new property built to increasingly rigorous building standards, including Part L requirements introduced last year and the Future Homes Standard set to come into effect in 2025. It estimates new homes constructed to 2022’s Part L criteria will emit 71 per cent less carbon than the average older property.

As the 2025 carbon net zero housing target nears, Government must intervene to ensure the supply chain and skilled workforce exists to enable home builders to deliver ever more technologically-advanced and energy-efficient new homes the country needs.

Neil Jefferson, managing director at HBF, says: “The action industry is taking to continually improve the energy and carbon efficiency of new homes is contributing significantly towards government’s net zero action plan and helping to ease the mounting pressures on household incomes across the country.       

“As mortgage affordability gets tougher, rental costs increase and the country’s need for homes grows increasingly desperate, lenders and government must review affordability assessments in consideration of these numbers to support more people to get onto the housing ladder.

“Meanwhile, if government is serious about delivering the number of homes the country needs and achieving against its environmental commitments, nationwide investment in skills programmes, retraining and apprenticeships is essential