The housing market is undergoing a green transformation, with more and more lenders considering Energy Performance Certificates (EPCs) when assessing mortgage affordability. This shift towards sustainable lending practices offers exciting opportunities for both existing homeowners and future buyers.

 

In short, EPCs are mandatory documents that rate a property's energy efficiency on a scale from A (most efficient) to G (least efficient). They also provide recommendations for improvements and estimated cost savings.

 

Several leading lenders are now factoring EPC ratings into their affordability assessments. This means that homeowners with energy-efficient properties (typically rated A or B) may qualify for preferential interest rates. Conversely, those with lower EPC ratings might face stricter lending criteria.

 

Market leaders such as Lloyds, Halifax and Bank of Scotland are actively taking this into consideration when assessing affordability. Other lenders such as Nationwide Building Society have been offering green mortgages, which feature lower rates for those buying or remortgaging properties rated A - B for some time as well.

 

Homes rated A - B are going to be more cost-effective to heat, reducing running costs for the owners on a monthly basis, and subsequently increasing the amount of disposable income available to the occupiers.

 

Conversely, those buying property rated closer to the bottom end of the scale will naturally be spending more of their income on heating and fuel.

 

Well, if a borrower has to spend less of their income heating their home, it's natural that they have more disposable income to pay that mortgage. This might mean a lower interest rate, because reduced running costs would mean greater disposable income, or it may allow a lender to lend more against that property.

 

As a landlord not occupying the property, there is no change to the amount of borrowing available to you. 

 

However, those landlords with properties that are typically bought by first-time buyers may benefit from an increased buyer pool if the property scores higher on the EPC.

 

Additionally, 20% of respondents to a survey by Knight Frank in 2022 stated they’d pay more for an energy-efficient home - meaning you could sell your investment for more if the EPC band is higher.

 

Scores of properties and owners across the UK have a greater incentive to make improvements to their property. Adding value and making your property more attractive in the eyes of a buyer, if you decide to sell your property.

 

Not thinking of selling any time soon? You'll still help to reduce the monthly cost of running your home AND unlock the potential to bring your mortgage rates down.

 

Finally, a greater financial incentive to improve energy standards in properties throughout the UK will continue to contribute to a greener future, helping to reduce household footprints.

 

Our in-house Assessor, Jack generally recommends increasing loft and internal wall insulation as one of the most cost-effective ways to make gains on your EPC, however, this will differ from property to property. For specific advice on how Ultralets can advise you on improvements, please contact Jack Shelley on 01482 562562.