Halifax, Lloyds and Bank of Scotland will use the EPC ratings of properties when calculating the affordability of mortgages, it was announced today.
The lenders, part of the Lloyds Banking Group, will analyze energy costs for homes from Tuesday 10 December 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 a rise in the amount the banking group is likely to lend.
It is the first mortgage lender to take the energy efficiency of a home into account when calculating affordability. Borrowers buying a home or taking out a new mortgage will be affected by the change, as will existing customers switching to a new mortgage with Lloyds.
All homes that are sold must have an Energy Performance Certificate (EPC), which indicates how energy efficient the property is.
Those with the highest ratings are likely to have lower energy bills. Lloyds said this will have an impact on disposable income, which is a strong indicator of affordability for potential mortgage borrowers.
Amanda Bryden, head of Halifax Intermediaries and Scottish Widows Bank, said: “We know that more energy efficient homes tend to be cheaper to run. With the help of EPC data and energy bill analyses, we can reflect this in the affordability of mortgages.”
While homes with the highest A and B ratings will see an increase in lending, those with the lowest ratings – F and G – will see a “small reduction” in the maximum loan amount, Lloyds said. It is believed that approximately 3% of homes fall into this category.
The maximum loan amount does not change for categories C, D and E
Halifax, Lloyds Bank and Bank of Scotland offer support to existing homeowners who want to improve the energy efficiency of their homes through Rewards for green livingwhich offers up to £2,000 cashback on a range of energy efficient home improvements.
They also offer a range of incentives in heat pumps, solar panels and insulation through partnership agreements.