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Welsh first home buyers can borrow more for energy efficient homes

Wales has become one of the first countries in the world to tie home energy performance to its loan terms, with the government last week announcing that energy efficiency would be factored into loan affordability calculations for its Help to Buy-Wales shared equity loan scheme. 

“From this June, the Help to Buy-Wales equity loan affordability calculator will include an energy efficiency element,” housing and regeneration minister Rebecca Evans said.

“A more energy efficient home costs less in bills, so buyers will potentially be able to afford to borrow more. We know that energy spending can be a major household outgoing, which is why we want to make energy efficiency part of the consideration when people look to buy a home in Wales.” 

It is hoped the changes will increase the market appetite for energy efficient new buildings and retrofits amongst lenders and buyers, home sellers and builders.

The Help to Buy-Wales scheme now boasts a new part in its online calculator that reveals the running costs of an average three-bedroom house with differing energy performance certificate (EPC) ratings, which operate on a scale from A (excellent) to G (dire).

A home with a Band E rating costs between £125-170 (AU$225-306) a month to run while a similar Band A house could cost a third of this – just £40-54 (AU$72-97) a month.

The calculator shows that this could allow up to £4000 (AU$7208) more to be borrowed on an house upgraded from Band E to Band C, and an extra £11,500 (AU$20,722) if the property were upgraded from G to A.

The policy move was based on research by the Building Research Establishment that demonstrated and modelled the link between energy efficiency and household fuel bills. It’s also based on recommendations fromWales’ Zero Carbon Hub, which was set up to advise Welsh ministers on what’s needed to achieve zero carbon new build, and other ways for buildings to help deliver Wales’ three per cent annual greenhouse gas emissions cut target.

In Britain as a whole, a Green Finance Taskforce charged with exploring new ways in which money markets can drive demand for low-carbon infrastructure such as housing, last month called on lenders to better promote awareness of green factors (see page 12) in their lending decisions in order to “mainstream” environmental factors in the house buying process.

This coincided with Barclays becoming the first mainstream bank to launch a green mortgage that does just that. It is providing a 10 basis point discount on standard interest rates to buyers of A- or B-rated new-build homes from one of the five house builders the lender has partnered with. Eighty per cent of new builds constructed last year reached this target.

“We are increasingly hearing from mortgage customers that they’re interested in purchasing an energy efficient home,” Barclays Mortgage head Hannah Bernard said.

We’re proud to be the first major UK mortgage lender to offer a product that helps buyers in decision to purchase a green new build home.”

Ms Evans said mortgage lenders weren’t obliged to follow the Welsh government’s lead but hoped they would make energy efficiency part of the mortgage consideration.

David Thorpe is the author of A London Conversation: Business Briefing on Green Bondsthe Earthscan Expert Guide to Energy Management in Buildings and the Earthscan Expert Guide to Sustainable Home Refurbishment.

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