From 2025, an increasing number of high street lenders are expected to include EPC ratings in assessing mortgage affordability.
EPCs Explained 🔍
Energy Performance Certificates (EPCs) are a requirement for all homes that are being sold or rented. They provide a rating from A to G, that shows how energy-efficient a property is, as well as its estimated running costs. The certificate also offers suggestions for improving energy efficiency and the potential savings these changes could bring.
How EPC Ratings Impact Energy Costs 💰
The better the EPC rating, like an A or B, would result in lower costs, and therefore more money to spend for other expenses, as these homes generally cost less to heat. Whereas homes with lower ratings such as E, F, or G, tend to have higher energy bills.
How Lenders Use EPC Ratings in Affordability Calculations ⚖️
Lenders, including Lloyds, Halifax, and Bank of Scotland, have now started to consider EPC ratings into how they calculate mortgage affordability. This means they consider the cost of energy bills when determining how much a borrower can afford to repay.
Green Mortgages 🌱
While not all UK lenders currently include EPC ratings in their affordability checks, some offer ‘Green Mortgages’ with special rates or terms for energy-efficient homes, encouraging buyers to save on energy bills and benefit from lower interest rates and improved borrowing terms.
Do Green Mortgages Offer the Best Value? 💎
A recent report by the Money Saving Expert found that while green mortgages may offer better rates than non-green options from the same lender, they may not always be the best deal in the wider market. Experts hope more incentives will emerge to encourage investment in energy-efficient homes.
Summary 🖋
EPCs rate properties from A to G based on energy efficiency and running costs, with higher ratings indicating lower energy bills. And this year, more lenders will factor EPC ratings into mortgage affordability calculations, reflecting the importance of energy efficiency. Some lenders have even started to offer ‘Green Mortgages’ with better rates or cashback for energy-efficient homes. Although green mortgages can provide benefits, they may not always be the best deal compared to the wider market, but experts hope for stronger incentives in the future.
Related Links
https://www.moneysavingexpert.com/mortgages/green-mortgages/
https://www.lloydsbank.com/mortgages/help-and-guidance/eco-home-hub/how-to-get-an-epc-rating.html
If you have any questions regarding this topic, please feel free to get in touch.
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We look forward to supporting you in the months ahead 🔥 ⚡️
AAL Property Solutions 🌲
28/01/2025