Help to Buy Wales equity loan applicants will be able to borrow more money for energy efficient homes.
Housing and regeneration minister MP Rebecca Evans announced from this June, the Help to Buy Wales equity loan affordability calculator will include an energy efficiency element.
This means when people look to see how much they can afford they will be given different options depending on the energy efficiency of the property they are looking to buy, and loans will be adjusted according to the energy rating of the home they choose.
The Welsh Government is the first organisation in the UK to put this in place.
Speaking at the UK Finance Welsh Annual Mortgage lunch yesterday (9 May), she said: "A more energy efficient home costs less in bills, so buyers will 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.
"We have worked closely with the Building Research Establishment (BRE) on the Lenders project, which modelled this work.
"Whilst there is no obligation on mortgage lenders to change existing practices or their own affordability assessments, we hope to see them follow our lead and make energy efficiency part of the mortgage consideration for all homebuyers in Wales."
Andrew Sutton, associate director for BRE Wales, said: "This announcement is a great step for the Lenders project outcomes and fantastic news for first-time buyers in Wales.
"The more accurate forecasting provided by the research will help many onto the housing ladder who might have struggled to obtain a mortgage previously, and the research we will do in parallel with the adoption should help other financial institutions better understand the practicality of implementing."
Jackie Bennett, director of mortgages at UK Finance, said: "It will be useful for potential customers to see how much they might save by buying an energy efficient property.
"Lenders will carry out their own detailed affordability assessment which they are required to do under the FCA's responsible lending rules. We will, of course, work with the Welsh government and our members as it's thinking develops in this area."
Daniel Bailey, principal at Derbyshire-based Middleton Finance, said: "I am a big advocate of improving the quality of the homes we build, especially making them more energy efficient as this is a big household expense.
"I have my reservations in allowing borrowers to borrow more based on this. How is this going to be calculated? How many lenders will take this into account on their affordability calculations.
"I have my concerns about Help to Buy in general and recommend any borrower to seek independent advice and understand what the long term costs to you are once you have to start paying back the government loan and the implications when you come to sell the property.
"I would not be in favour of encouraging borrowers to take on more debt through the Help to Buy scheme."
Steven Sibley, director at Berkhamsted-based advice firm Highclere, said the more you borrow the higher the monthly mortgage repayments, but, if you are reducing your monthly energy bills then that should help balance out your monthly outgoings.
He said: "The sensible option therefore may be to fix the mortgage rate, as this will ensure that element won't increase during the fixed rate period. The real concern though, is that the energy costs won't remain sufficiently low to keep the over all costs within the client's budget."
To learn more about Help to Buy, and earn an indicative 60 minutes of CPD, click here to read FTAdviser's Guide to Help to Buy.
aamina.zafar@ft.com
