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Consultation on energy efficiency and mortgages raises concern

From Robert Ulph on March 8, 2021

In the latest consultation the Government has on ‘Improving home energy performance through lenders’, Propertymark has raised concerns that the proposed targets are unrealistic and could put people off from moving home.

The consultation proposes to introduce a target-based approach for improving the energy performance of lenders’ portfolios. This includes a portfolio average target of EPC band C by 2030 and an assumed maximum spend for improvement works set at £10,000.

Propertymark is concerned that many would-be home buyers will not be able to afford improvement works on top of the existing cost of moving house and those in rural areas, those with older properties or listed buildings and in conservation areas will be impacted. There are also concerns that the additional borrowing costs are unlikely to support more first-time buyers.

In addition, these proposals will affect the mortgage lending market and should not be made part of the core business of mortgage lenders. These proposals could lead to increased rates and limited products and could distort the market so that lending is much more attractive on new build properties to improve the rating of a lender’s portfolio.

Improving energy efficiency depends largely on the householder choosing to carry out improvements and central to Propertymark’s view is that the Government should be working to the principle that every home should become as energy efficient as practically possible within the limits of cost, consent and technology.

Worryingly too, is that the proposals are not aligned with the Government’s plans for improving the energy performance of privately rented homes and could introduce two price caps for landlords. To this end, the criteria for energy efficiency of private rented accommodation are linked to occupation rather than property ownership. Therefore, the Government must be careful not to stifle future investment in the buy-to-let market and ensure there is a joined-up approach to both lending affordability and energy performance through use and consumption.

Propertymark propose that to improve the energy efficiency of housing stock without negatively impacting the property market, the Government must set out a plan for efficiency improvements that are linked to the recommendations on an EPC. They must use tax breaks to incentivise homeowners to finance energy efficiency improvements. Finally, introduce an adjustable rate of property tax tied to energy performance.

These measures would help to introduce increased ‘saleability’ for more energy-efficient properties, so improvements become standard for homeowners seeking to reduce costs and improve the desirability of their homes. To this end, it is important that the Government introduce policies and financial initiatives that will support improving energy efficiency based on the property type rather than tenure.

I will continue to work with Propertymark in their work, lobbying and challenging the decision makers in the industry to make vital changes, and I will keep you updated with progress and policy changes. As always, if you have any questions on these issues or anything in the local property market, please call me.