Mortgage lenders have recently started to introduce the collection of a property’s Energy Performance Certificate (EPC) rating on purchase and remortgage applications. This new development is part of a wider trend in the financial sector towards greater sustainability and responsible lending.
An EPC rating is a measure of the energy efficiency of a property, ranging from A (most efficient) to G (least efficient). It takes into account factors such as insulation, heating systems, and energy-saving measures such as double glazing and solar panels. The rating is designed to help homeowners and potential buyers understand how energy efficient a property is, and to identify areas where improvements can be made to reduce energy bills and carbon emissions.
By collecting EPC ratings as part of mortgage applications, lenders are able to more accurately assess the risk of lending on a particular property. A more energy efficient property is likely to have lower energy bills, which in turn means that the homeowner is less likely to default on their mortgage repayments. This reduces the risk for the lender and could potentially result in lower interest rates for borrowers.
“More and more lenders, with Halifax being the latest, are starting to introduce the requirement of collecting EPC details at the application stage and I can see many more lenders following suit. This is a real development in the market and something that I think will benefit both the lender and homeowners,”
Chris Lees, Co-Founder at Resolve Financial Solutions.
In addition to reducing financial risk, collecting EPC ratings also has important environmental benefits. Buildings are responsible for around 40% of global energy consumption and carbon emissions, so improving energy efficiency in the built environment is a crucial part of the fight against climate change. By encouraging homeowners to make energy-saving improvements, lenders can play an important role in reducing the carbon footprint of the housing sector.
There are also potential benefits for homeowners themselves. By improving the energy efficiency of their property, they can reduce their energy bills and improve the comfort of their home. This could be particularly important for vulnerable households, such as those on low incomes or with health conditions that are exacerbated by cold and damp housing.
Of course, there are also potential challenges to collecting EPC ratings as part of mortgage applications. For example, not all properties will have an EPC rating, particularly older properties that have not been sold or let since the introduction of EPCs in 2007. There may also be discrepancies between EPC ratings and actual energy usage, particularly if a property has been renovated since its last assessment.
Overall, however, the introduction of EPC ratings into mortgage applications is a positive step towards greater sustainability and responsible lending. By encouraging energy efficiency in the housing sector, lenders can reduce financial risk, protect the environment, and improve the quality of life for homeowners.
If you would like to find out more information about EPC ratings or have any questions around this subject area then please get in touch.