Mortgage lender may offer larger loans to those with green homes

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Those with energy efficient homes will soon be able to borrow up to £ 12,000 on a mortgage from a single lender – as data shows the number of available green mortgages has increased fivefold since April.

Data provided by broker Property Master for This is Money shows that the number of green mortgages, for both residential buildings and rental apartments, has increased from 78 products in April to 400 now.

Green mortgages reward borrowers for having a good rating of energy efficiency certificates by lending them more money based on their income, lowering fees or giving them a higher interest rate.

Green: Green mortgages reward those whose homes are energy efficient

Green: Green mortgages reward those whose homes are energy efficient

As a final step to encourage greener home purchases or retrofit existing homes with greener improvements, the Monmouthshire Building Society is in the process of “recalibrating” its affordability calculator so that those with an EPC rating of A or B can borrow more than homes. rated D, E, F or G.

The average EPC rating for homes in his books is D.

Monmouthshire is currently testing the new concept at two new developments in Wales and told This is Money that those in the top two groups could borrow up to £ 12,000 more than those in less productive properties.

Most lenders use government data on average electricity bills to track the running costs of a home, but these totals do not always accurately reflect the real running costs of a home.

It is cheaper to own a more efficient home, and theoretically the owner-owner has more disposable income that could be used to pay higher mortgage payments.

Some mortgage experts say this approach to lending is long overdue.

“From a borrowing perspective, it’s right that a client who buys a property that costs them less every month should be rewarded when assessing affordability,” says Matt Coulson, director of brokerage Heron Financial.

“If they don’t have to set aside that same amount of their income to pay utility bills, they should have more money to pay.”

Adaptations like solar panels can increase the chances of getting a C or higher energy efficiency certificate and potentially qualify for a green mortgage.

Adaptations like solar panels can increase the chances of getting a C or higher energy efficiency certificate and potentially qualify for a green mortgage.

Most existing green mortgages require a borrower to find and apply for a specific “green” product.

If Monmouthshire does indeed implement the new calculator into all of its lending operations, it could be the first to factor in the low EPC rating, no matter which product the customer chooses.

Monmouthshire made this decision after partnered with Valuations And Lending Underwriting Energy Reduction, or The Appraiser; a group of real estate organizations, including Rightmove and the Royal Institute of Chartered Surveyors, that are exploring ways to link energy efficiency with mortgage lending.

Graeme Samsion, Lending Manager at the Monmouthshire Building Society, says: “The problem we face is that energy efficient new builds are more expensive to build and therefore sell at a higher price, which shrinks the market for them. because people cannot get a big enough mortgage.

“But lenders may consider providing additional loans for these homes because buyers’ bills will be low.”

Property Master data shows that 400 eco-friendly products are offered by 19 lenders, including most of the well-known companies.

However, their motives for this are not entirely altruistic, as policy changes are on the horizon that will force both individuals and businesses to reduce their environmental impact.

Angus Stewart, Chief Executive Officer of Property Master, says: “Basically, we are seeing lenders being able to comply with the government’s net zero policy, which includes a commitment for all domestic property to reach EPC C level or higher by 2035.

“Under this mortgage lending, the average energy efficiency of their domestic portfolios is expected to be at least EPC C by the end of 2030.”

Is this enough to make homeowners green?

Under pressure to balance their ledgers, more lenders are likely to offer incentives to attract those with good EPC ratings.

This is good news for those who already own energy efficient properties.

Borrowers are unlikely to choose green real estate just because they can access a slightly lower interest rate.

Mortgage Broker Gerard Boone

But with the price of green new builds and the cost of retrofitting things like air source heat pumps still very high, some experts find it hard to believe that a slightly higher mortgage or slightly higher interest rate will be enough to convince homeowners to buy a greener home or do some significant renovations.

“I don’t expect green mortgages and related incentives to have a significant impact on demand[forgreenhomes”saysGerardBooniemortgagebrokerBoonBrokers[foreco-friendlyhomes’saysGerardBoonmortgagebrokeratBoonBrokers[наэкологическичистыедома»-говоритДжерардБунипотечныйброкерBoonBrokers[foreco-friendlyhomes’saysGerardBoonmortgagebrokeratBoonBrokers

“Borrowers are unlikely to choose green real estate just because they can access a slightly lower interest rate or slightly higher availability.”

However, this can have a greater impact when combined with other motivating factors such as cheaper bills and no need for repairs.

But what about those who cannot afford to renovate their home?

Ultimately, the supply of green homes is still quite limited, and there are fears that those in older homes will be unfairly punished if lenders continue to offer preferential treatment.

Katie Brain, mortgage expert at Defaqto, says: “On the one hand, this could mean that borrowers buying a low-energy home can borrow more, which can be attractive when real estate prices are high.

“But what about those who cannot afford newer, lower-energy properties? This can be seen as punishing people. “

Incentives aside, the cost of buying an energy efficient home will be too high for some.  Prices are often higher than older homes, and refurbishment can be costly as well.

Incentives aside, the cost of buying an energy efficient home will be too high for some. Prices are often higher than older properties, and upgrades can be costly as well.

Monmouth says it is committed to helping people with the costs of remodeling their properties by providing additional home loans at a favorable rate.

“We are particularly interested in supporting our members buying homes from zero-income sites, but we also want to help existing homeowners improve their properties,” says Samsion.

“As part of a pilot project, we inspected clients’ homes and paved the way for them to achieve zero carbon emissions.”

While this may help some people on their way to more efficient energy use, getting a loan is still a big question when the exact costs are unclear.

Although it is growing rapidly, the green mortgage sector is still in its infancy and little information is yet available on how much the public is interested in such products.

There could be a big push from the banks, but it remains to be seen if the average homeowner will bite.

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