The Squeeze of the cost of energy prices is felt throughout every home. The soaring rise in energy bills will leave many feeling the pinch. Coupled with the rise in inflation and the current cost of living crisis, there is nowhere to escape.
Every pound counts and saving where you can is necessary with energy prices predicted to rise further this year. Households are being encouraged to save money by improving energy efficiency. Improving the energy efficiency of your home is the best long term solution to reducing energy bills.
The mortgage market is doing its part to encourage this and this is how.
The government set into motion their plans to reduce the carbon emissions by 75-80% of current levels by 2035. Housing is responsible for roughly 14% of the UK’s total emissions.
Regulations to building more energy efficient homes to reduce housing emissions have been put in place by the UK government. Existing homes can play a part too. According to the Climate Change committee, 19 million properties have an Energy Performance Certificate (EPC) less than “C”.
Mortgage providers have launched “Green Mortgage Products” which incentivise properties with A & B, by introducing lower interest rates than those available for standard EPC rated properties. This is to persuade homeowners to make their homes more energy efficient.
Energy Performance Certificates are an assessment of how well your property uses and retains energy. The improvements to your homes energy efficiency can save you in energy bills and in mortgage interest payments.
On rates currently available, an EPC rating of A or B would get you a residential green mortgage product rate over five years of 2.56% at 60% loan to value (LTV) versus the standard mortgage product rates which would be 2.67% for the equivalent LTV. This means someone on a green mortgage interest product will pay 3.09% less interest on their mortgage over that same five year period. This is a saving of thousands over the medium to long term.
As long as your property Energy Performance Certificate is A or B you qualify for a green mortgage.
Investment BTL properties can also qualify for green mortgage products. The additional benefits of energy efficiency in these properties can extend beyond the lower mortgage interest rates you would qualify for. Energy efficiency properties raise the value of the property and can mean more rent can be charged by the landlord. The tenants would in turn also save on energy bills.
Many investors have seen to use this as a strategy to increase their property portfolio value by improving low energy efficient BTLs in order to increase the value of the property and be able to charge higher rents and in turn increase their rental yields.
The government estimates the cost of improving your property to an energy rating of “C” to be around £4,700. Residential homeowners and landlords on tighter budgets may not have the cash to make the improvements needed to obtain a high enough EPC rating to allow them to switch to a green loan.
The Department for Business Energy and Industrial Strategy (BEIS) and the Chancellor Rishi Sunak confirmed that the fourth and final phase of the Government’s Energy Company Obligation (ECO) scheme will go ahead. The new ECO grant scheme will run over 4 years, and end in March 2026. Like before, ECO grants will be available to improve the energy efficiency of the UK homes that need it most. The grants are funded by energy suppliers.
In this scheme, ECO grants will focus on a property’s EPC to ensure the home can gain maximum benefit from any energy efficiency measure installed. The aim of the ECO is to help UK homes achieve an EPC rating of at least a C.
Making your home more energy efficient is not just about installing the most expensive solar panels. The aim is to create all-round home energy efficiency, from roof and windows to walls to heating. Small improvements to the home can count to the overall energy efficiency of your home.
The government encourages you to use TrustMark registered company for improvements. Making upgrades to take advantage of requirements to make the properties more energy efficient which will raise the value of your property.
Contact us for advice on your mortgage needs. We deal with a variety of advice services in the mortgage market. We can help you too!
Written by: Nwabisa Janda
16 June 2022