Mortgage brokers are not prioritising the energy performance of properties in their advice to clients, with some dubbing the topic “virtually unspoken” of and “unconsidered” in the mortgage buying process.
A study published by Natwest today (October 18) found a mere 30 per cent of borrowers who intended to buy in the next 10 years considered a property’s energy performance rating a ‘high priority’.
This was in spite of standard energy bills tipped to rise this year, and regardless of experts highlighting how EPC ratings could impact property prices in the future.
Six brokers FTAdviser spoke to said they did not prioritise EPC ratings in discussions with clients, but some acknowledged the importance of such conversations in the future.
“The figures are regrettably no great surprise to me,” said Carl Shave, director of Just Mortgage Brokers.
“Energy performance remains a virtually unspoken and unconsidered aspect of a home purchase for many unless highlighted by a survey.
“I suspect it is also not a topic that is high on an adviser’s agenda when discussing mortgages with a client.”
Shave concluded that until the government and developers take the issue of energy efficient housing “by the scruff of the neck”, it was “unlikely that the typical home buyer will give this any more thought than they do now”.
What's more, some advisers are skeptical as to how energy efficient new homes classed as A or B actually are.
Lewis Shaw, founder of Shaw Financial Services, said: “Most A or B rated homes tend to be new-build and there's a lot of evidence that actually the build quality on new homes is poor and that they aren't energy efficient at all”.
Shaw believes as inflation starts to bite and energy prices continue to rise, it will make more sense for homeowners to take steps to make sure their home is insulated and as efficient as possible.
“At the moment it isn't a deciding factor for the vast majority of people,” he explained. “However, it will become more important over time due to the climate crisis we are facing.”
Shaw also cited green mortgages, loans designed to reward buyers for upgrading their property - either in the form of cashback, or a better rate - as driving factors for change.
“As more and more lenders start to offer more competitive mortgage deals for EPC A and B rated homes, it will likely drive a change in people’s behaviour.”
Chris Sykes, associate director at Private Finance, agreed. “As demographics change over time and lenders further promote greener properties, maybe this figure [30 per cent] will increase.”
But currently, the lack of interest in EPC ratings expressed by buyers is not concerning advisers.
“It doesn’t concern me,” said Sykes. “I don’t think we are going to get into a situation where lenders are going to refuse lower EPC properties, they’ll just favour the higher EPC rated ones.”
Luke Spellman, a self-employed Coventry-based mortgage broker, agreed. "I don’t feel the EPC rating of a property will have, or currently does have, too much of an impact on price."
He added: “I don’t usually advise home movers or first-time buyers to consider EPC ratings, as usually these are properties that are in need of renovation anyway.”
Sykes thinks an EPC rating is ultimately just one of many considerations when buying a property.
“It doesn’t surprise me EPC isn’t high up the list as often compromises have to be made when buying a property anyway,” he said.
Natwest’s study found EPC ratings were the fourth lowest priority among the 12 factors it surveyed across 4,500 adults throughout the third quarter of 2021.
The EPC rating ranked below other environmental factors, such as air quality (37 per cent said ‘very important’), the amount of local green space (38 per cent) and levels of noise pollution (41 per cent).
Out of all the environmental factors listed, risk of flooding was considered the most important (55 per cent), even beating internet speed (46 per cent) on importance.
Managing director at Hudson Rose, Graham Taylor, said EPC ratings were not something his team “generally discuss with clients”, unless they are buying something more modern.
This is because for those clients looking at a more efficient house, green mortgages could make them a small saving.
“However, I can see that the energy efficiency of a property is going to play more and more importance in the home buying process,” Taylor continued. “With increasing energy bills and more awareness of the challenges of climate change being the driving factors.”
And due to the general ongoing costs of a less efficient property, Taylor said: “I think in future it is very much something that will be factored into house prices.”
David Hollingworth, associate director at L&C Mortgages, said it will be “fascinating” to follow the degree of importance buyers place on an EPC rating.
“It is bound to increase,” he said. “Partly through individual desire to improve our footprint and potentially through the knock-on cost of low energy efficiency.”
Since April 2020, all buy-to-let properties have had to have an EPC rating of E. But the government wants to raise this requirement to an EPC rating of C from 2025, leading some to worry properties which fall below this band will become ‘unmortgageable’.
“Similar measures could in theory be applied to existing housing which would certainly begin to affect buyer attitude,” said Hollingworth.
“I’d hope that we will see the importance of energy efficiency climb as a result of the benefits it can bring though, rather than through being imposed.
“Green mortgages are growing in number and will be one way to help highlight how homeowners can improve their property. Providing incentives to those undertaking improvements feels the more positive way to boost awareness of EPC ratings.”
ruby.hinchliffe@ft.com
