Bigger loans, to buy green homes

Bigger loans, to buy green homes

The Welsh scheme will factor the home's energy efficiency into lenders' affordability calculations

Borrowers will be able to get a bigger mortgage when they first buy greener properties, under a pioneering scheme to promote energy efficiency.

Research has found that taking a home's efficiency into account in lenders 'affordability calculations could allow them to increase loans by £ 11,500 because buyers' electricity and gas bills will be lower.

That theory will come true from June, when buying aid loans in Wales will take into account the energy rating of newly built houses worth up to £ 300,000.

The measure is one of several innovations being discussed to overcome homeowner inertia on energy efficiency, along with tax cuts for greener homes.

The Welsh government said the change should open the housing ladder to more people and encourage buyers to consider energy ratings.

Rebecca Evans, Wales's Housing Minister, said: "We hope that lenders will follow our lead and that energy efficiency will be part of the mortgage consideration for all home buyers in Wales."

The Building Research Establishment, which has carried out research on green mortgages, said it hoped that banks and building societies would realize the importance of considering energy use in lending decisions.

Andrew Sutton, associate director of the group, said: "My main hope is that the mortgage industry will react."

He said lenders knew there was a growing argument to include energy efficiency in their decisions, but were understandably nervous about moving first - and the costs of implementing the changes.

Barclays is one of the first to offer a green mortgage product, offering borrowers a discount on the loan interest rate on new construction classified in the two main energy bands, A and B.

However, Sutton said the approach had great potential for existing homes as well. For example, a homeowner who wants to borrow an extra £ 10,000 on their mortgage for a loft conversion could borrow more if during work they put insulation that took ownership of an E-rated home to C-rated.

Such incentives could change the "my home is my castle" mentality that has slowed efficiency improvements in privately owned homes, Sutton said.

Other carrots have been suggested in recent years to encourage homeowners to install insulation, from a lower stamp duty for efficient homes to municipal tax breaks for greener properties.

Richard Twinn, Senior Policy Adviser at UKGBC, said the Welsh Green Mortgage scheme was symbolically very important, but the stamp tax would be the real game changer.

"The stamp tax is probably the most effective mechanism the government has to apply to this," he said.

The plan would be revenue neutral for the Treasury because discounts in tariffs for buyers choosing more efficient properties would be offset by people who would pay more for drafty and inefficient properties.

The government is due to announce new policies later this year, possibly in the fall budget, on how to encourage people to make their homes more efficient.

However, Twinn cautioned against high expectations, saying small trials were likely to take place rather than a "big bang" on stamp incentives.

Video: The Worlds Most Cost-Effective, Custom-Built Green Homes. Steve Glenn (October 2020).