Risky Proposal - Mortgage Lending linked to EPC rating?

Posted on Thursday, November 19, 2020

Risky Proposal - Mortgage Lending linked to EPC rating?


Government launches ‘risky’ plan to link EPCs to mortgage lending

NAEA boss Mark Hayward says proposals to make lenders put EPCs at heart of their lending would endanger housing market.

Estate agents have reacted with caution to government proposals that would incentivise mortgage lenders to include EPCs in their lending decisions.

The Department for Business, Energy and Industry Strategy (BEIS) wants to force lenders to reveal how green their mortgage portfolios are and, as a result, ‘support them to improve the average energy efficiency of the properties they finance’, the consultation document says.

In practice, this means the government hopes to shame lenders into ensuring the homes they grant mortgages for meet minimum EPC standards and persuade them to offer ‘green mortgages’ to reward compliant homeowners.

“We need to be careful however to not financially penalise those seeking to sell their homes,” says Mark Hayward, Chief Executive of NAEA Propertymark.

“If lenders change their lending criteria to take into account EPCs there could be unintended consequences, ultimately making older homes harder to sell.”

The consultation document also suggests that the current requirement for all sales properties advertised by agents to have an EPC will be much more heavily policed in the future as the government uses EPCs as a key tool to reach its 2030 carbon neutral targets.

EPCs are already a feature of the buy-to-let mortgage market; mortgage lenders are currently required to ensure properties they lend against have reached at least an ‘E’ rating.

The consultation was published at the same time Boris Johnson announced the government’s Green Homes Grant it to be extended by a year to give landlords and homeowners 12 months more to complete their upgrade projects.

Read the consultation in full.
Read more about EPC regulation.

Nigel Lewis 19th November 2020 – Writing for ‘The Negotiator’