A Government consultation which closed last month has proposed new rules to encourage mortgage lenders to help householders improve the energy performance of their homes. It has received strong support from Elmhurst Energy, the UK’s largest accreditation scheme for energy assessors.
Under the plans outlined by the Department for Business, Energy and Industrial Strategy (BEIS), mortgage lenders will initially be encouraged, and ultimately required, to disclose information on the energy performance of their property portfolios in England and Wales every year, as well as the gross value of their lending for energy-saving home improvements.
The Government has also been gathering views on the merits of setting minimum energy targets for mortgage lenders that could help build the market for green finance products to support home energy efficiency.
Elmhurst Energy is already working with two major lenders to help them prepare for the market opportunities and risks of this proposed new regime.
For one, this involves training its surveyors to become fully qualified domestic energy assessors so that they can interpret and audit EPC data accurately and can advise customers more easily. For another, Elmhurst has provided consultancy services to determine the likely costs of upgrading the energy efficiency of the average house in England. This knowledge helps the lender to understand pressures on asset valuations, to manage risk and understand the financial implications of Government policies around energy efficiency.
In its response to BEIS, representing the views of more than 7,000 energy assessors, Elmhurst urged mortgage lenders to adopt the latest proposals, but also challenged Government on the underlying objectives.
Martyn Reed, chief executive of Elmhurst Energy, said:
“These proposals contain important ideas that have been mooted for many years, and there is no doubt that mortgage lenders hold the keys to unlocking a lot of investment in more energy efficient properties. As the saying goes, ‘sunlight is the best disinfectant’. By shedding light on the energy performance of mortgaged homes, pressure will be brought to bear to find new ways to improve our housing stock.
“Working with lenders as part of a sustainable economic recovery will not only help homeowners to overcome existing barriers to improving the energy efficiency of their homes, but will also create and sustain jobs in the home retrofit supply chain.
“The proposals will provide significant benefits to homeowners as well as the environment. In theory it should help to reduce bills, increase comfort, increase property value, as well as support the delivery of our fuel poverty targets and the UK’s fifth Carbon Budget. For energy assessors it will also undoubtedly mean more opportunities with increased confidence being placed in energy assessments and Energy Performance Certificates (EPCs).
“However, at the moment some of the messages are muddled. The Government needs to be clear about whether this proposed policy is about saving cost or carbon, or both.
“EPCs are based on a cost metric. They are the ideal tool for developing incentives to reduce energy bills and ensure warmer homes. But if carbon reduction is also a priority – which we absolutely believe it should be – then BEIS should be introducing a dual metric for mortgage lenders, whereby they can report on minimum standards on environmental impacts as well as the EPC.”
To avoid a risk that mandatory disclosure of the energy performance of their portfolios could potentially cause mortgage lenders to shift their lending away from older, poorer performing homes in favour of a ‘better’ portfolio, Elmhurst is proposing that a ‘weighted average EPC’ should be disclosed taking into account the age bandings of properties. It is also recommending that there is improved access to the Government’s new EPC register to link with lenders’ systems.
“Build age can have a major impact on the likelihood of a ‘good’ or ‘bad’ EPC rating,” explains Martyn Reed. “A portfolio consisting of properties within an industrial northern city would therefore perform ‘worse’ than a modern town of new properties. We must be careful to ensure such disclosures do not affect the desirability or value of parts of the property market to mortgage lenders, so we recommend build age is added to their reports in the interest of fairness and market stability.”
Elmhurst is in favour of the proposals to require an updated EPC to be issued to measure the effectiveness of a lender’s investment in energy-related home improvements, for more rigorous policing of the rules surrounding EPCs in the private rented sector (MEES), and for a voluntary target of meeting a portfolio average of EPC Band C by 2030.
Martyn Reed says:
“Mortgage lenders must play their part in facilitating the changes needed to meet our net zero targets. We would be daft to ignore the impact and importance of their relationships with customers at critical trigger points, such as home purchase, renovation or re-mortgage. Our hope is that these proposals will drive forward greater innovation in ‘green mortgages’ and other interventions that improve the energy efficiency and value of our homes and other mortgaged properties.”
To read Elmhurst’s consultation response in full, go to: https://www.elmhurstenergy.co.uk/news
Established 27 years ago, Elmhurst is the UK’s largest EPC accreditation scheme. It supports a membership of more than 7,000 quality assured energy assessors and a growing body of retrofit assessors and coordinators making use of new market opportunities created by schemes like the Green Homes Grant. In 2020, Elmhurst members were responsible for 60% of all EPCs issued.
About the Author
Fiona Wilson is a Business Development Manager with Elmhurst Energy, with a focus on existing customers in England and Wales. She joined Elmhurst Energy in 2016, having joined the team from NHER where she worked since 2007. Fiona is a well-known face in the energy efficiency industry, where her in-depth knowledge and technical specialism is indispensable to members. Her passion and enthusiasm for improving quality, providing assurance and promoting energy efficiency matches with Elmhurst’s desire to provide industry-leading training, accreditation and software.
Tenancy Deposit Scheme (TDS) is the only not-for-profit, Government-approved scheme for the protection of tenancy deposits. TDS provides impartial adjudication for any disputes that may arise over the tenancy deposits that we protect.
Or you can request a personalised demo of the database to discuss how TDS Custodial could streamline your deposit protection process here.
TDS can only comment on the process for our scheme, other deposit protection schemes may have a different process/require different steps. Content is correct at the time of writing.
These views are those of the author alone and do not necessarily reflect the view of TDS, its officers and employees.