Andrew Sutton, Associate Director BRE Wales, explains how the Lenders project takes Wales a step closer to being a low carbon society. 

Being better about how we use our energy must become second nature. 

CEW is working alongside Nationwide and Principality Building Societies, BRE and others, to drive energy into the way mortgages work through the LENDERS project. But we need the help of all of our stakeholders to reach out householders. 

The “LENDERS” project, conceived by BRE and developed from initial research with CEW, is a collaboration between BRE, Nationwide Building Society, Principality Building Society, Energy Savings Trust, UKGBC, UCL, ARUP and CEW.  Part funded by Innovate UK the project proposes to make a subtle change to the way mortgage companies assess what customers applying for their loans can afford. 

Currently, a customer’s incomings and outgoings are assessed via an ‘affordability calculation’. Energy costs represent the largest unavoidable cost that is factored into this calculation for a customer after the mortgage repayments themselves. 

But, despite the availability of Energy Performance Certificates (EPCs) on all properties being sold, no consideration of the energy efficiency of the property being mortgaged is made, and the assumed energy costs currently only vary by around £25 per month and therefore have little impact on the capital mortgage amount the customer might be offered. 

The LENDERS project is generating, and robustly evidencing via large scale data analysis, an alternative approach. Through collecting data from the EPC alongside information on the occupancy gathered in future mortgage applications, the project believes it can provide a mechanism to the mortgage industry that more accurately predicts the customer’s energy costs. This will provide estimates of energy costs with a far greater range (perhaps £20 – £200 per month), and through the rest of the ‘affordability calculation’, will therefore much more significantly influence the capacity of the customer to repay a mortgage and, by consequence, change the capital mortgage amount the customer might be offered. 

If adopted by mortgage companies, this subtle change in the ‘affordability calculation’ could result in geared mortgage offers, with higher capital amounts of up to £15,000 or more being offered to purchase low energy homes compared to otherwise similar inefficient properties. It also opens the opportunity for mortgage companies to offer mortgages with conditions, or home improvement additional loans, based on enhancing the energy performance of an existing property, meaning that those in poorly performing homes also have a route to finance energy improvements.

Through the LENDERS project, the goal is to embed energy efficiency into the bedrock of our mortgage institutions, and through this society’s approach to thinking about energy when making the important step of buying or selling a property. After all, who buys a car these days without at least looking at the fuel economy and road tax costs? 

More on the LENDERS project can be found on the dedicated LENDERS website, www.epcmortgage.org.uk   

What we need now is for as many people as possible to take part in the research and fill out an online survey: http://tinyurl.com/jc7wjqa please share the link as widely as you can and look for more updates.