Homeowners buying and selling older draughty properties face a new penalty under Britain’s net zero drive, it is claimed.
The Halifax has announced a new regime that will see it decide how much it is willing to lend on a property by taking into account its green rating based on its Energy Performance Certificate (EPC).
Properties with a bad EPC rating are assumed to be more expensive to run, in terms of heating, hot water and cooking, which means any buyer would have less cash available to cover mortgage repayments.
These calculations will be taken into account when banks and building societies, such as the Halifax, decide how much they are prepared to lend.
The net effect of the change, which is expected to be followed by other banks and building societies, could create a two-tier market which benefits newer properties over older homes, which do not have the same level of insulation, double-glazing, solar panels or heat pumps as alternatives to central heating.
In future it could be become more difficult to borrow on homes built before 1919, where it could cost tens of thousands of pounds to install green improvements to reduce energy bills and running costs.
A property’s energy efficiency is rated with an EPC, ranging from A to G, with A being the most efficient. Customers with a high EPC rating, such as A or B, are assumed to have lower energy costs, and therefore may see a small increase in the maximum loan available on the property.
However, those buying a property with a low rating, such as F or G, may see a decrease in the available loan, according to Halifax.
In theory, buyers buying older, badly insulated, homes may not qualify for larger loans which may mean the prices of these properties will be knocked down.
A move by lenders to rely on EPCs to decide on home loans is likely to be controversial because there are concerns about their reliability.
EPCs have been criticised as “inaccurate” by consumer group Which?, and former housing secretary, Michael Gove, said there are “weaknesses” in the ratings system that drive “perverse outcomes”.
The move by Halifax is part of a wider move across the housing market to encourage and push property owners to cut household energy use in a drive to reach net zero targets.
Separately, the Energy Secretary, Ed Miliband, has reintroduced green targets for property investors, including buy to let landlords, who will be forced to upgrade their buildings to a minimum C rating by 2030.
The changes introduced by the Halifax mean will be no change to the loan available for properties with a C, D or E rating or where the EPC is unknown.
The new approach has sparked fears that buyers and sellers of older properties will be unfairly penalised.
Alice Haine, at Bestinvest by Evelyn Partners, told the Telegraph: “Green upgrades can be very expensive and while incentivising homeowners to make better choices is beneficial for the overall energy efficiency of the country’s housing stock, it risks creating a two-tier market where only those with the deepest pockets or those owning the newest houses can benefit.”
It could also negatively impact the housing market, Ms Haine has warned.
She added: “With the risk that older properties that require more substantial investment could see their values plummet, owners may be deterred from selling for fear they won’t secure the price they want. This could create a log jam in the market.”
Matt Thompson, of estate agency Chestertons, said EPCs will become a “focal point” for buyers. He highlighted how areas with a high proportion of older properties, such as London, may be harder hit.
For example, in Haringey, north London, 54.3 percent of properties were built before 1919, according to the Health Foundation.
Mr Thompson said: “Buyers have already been squeezed with interest rates. If they’re squeezed by EPCS, they will have to compromise even further on what they can buy.”
Earlier this year, Which? called for an overhaul of the EPC system as the ratings are “inaccurate”.
It argued that EPC ratings confuse homeowners, landlords and tenants. They have led to some homeowners spending thousands of pounds on energy-efficient upgrades.
According to the Office for National Statistics, around eight million homes in England and Wales have an EPC rating of C or lower.
Andrew Boast, of SAM Conveyancing, said the decision by Halifax to link home loans to EPC ratings will slow down the housing market.
He said: “Older homes, which often make up the bulk of the F- and G-rated properties, are likely to be disproportionately affected. These homes already come with higher maintenance and running costs, and Halifax’s change will further compound the financial barrier for prospective buyers and sellers.”
Amanda Bryden, of Halifax, said: “We know that typically, more energy efficient homes are cheaper to run. Using EPC data and energy bill analysis, we’re able to reflect that in mortgage affordability.”
