Mortgages  

Govt plans for EPC ranking to impact borrowers, IMLA warns

Govt plans for EPC ranking to impact borrowers, IMLA warns
 Credit: Rodolfo Clix from Pexels

Proposed energy efficiency league tables could cause lenders to base their lending decisions on a property’s energy efficiency, rather than a borrower’s needs, the Intermediary Mortgage Lenders Association (IMLA) has warned.

Responding to a government consultation on improving home energy performance through lenders, IMLA warned the league tables could result in many lenders avoiding properties that are less energy-efficient and could lead to remortgaging problems for borrowers.

In its consultation the Department for Business, Energy and Industrial Strategy (BEIS) proposed to provide public comparisons between lenders, such as by producing league tables ranking factors including the average EPC band, the percentage of the portfolio covered by an EPC, and the value of lending for energy performance improvements.

Kate Davies, executive director at IMLA, said: “It makes no sense to create artificial competition between lenders which could result in their avoiding lending on properties that are less energy-efficient and therefore less desirable.

“In the worst case this could lead to some borrowers being unable to remortgage or sell. It is critical that this is avoided.”

BEIS also proposed lenders publicly disclose information on the energy performance of their mortgage portfolios, requiring lenders to collect EPC data on their existing mortgage stock.

But Davies said the proposals would “oblige lenders to devote way too much time compiling and disclosing data in an exercise which - at the end of the day – won’t change a single low-energy lightbulb.”

At the same time the trade association said it recognised the housing and mortgage markets had an important role to play in addressing climate change, such as by offering ‘green mortgages’ to incentivise borrowers to improve the energy efficiency of their property.

Davies said: “Tackling the detail behind Britain’s response to achieving net-zero carbon emissions by 2050 is a huge challenge.

"But rather than creating a distracting paperchase for lenders or imposing penalties if they fail to meet arbitrary targets, reducing our carbon emissions will require rather more fundamental cross-departmental thinking on where responsibility lies and how real change can be incentivised and encouraged.  

"It will also need major investment to drive energy efficiency in the UK’s existing housing stock. These latest proposals from BEIS fall far short of the ambition needed.”

chloe.cheung@ft.com

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