EPC: Could your historic home improvements unlock cheaper mortgage rates?

LONDON, 21 April 2022: Ahead of Earth Day, on 22 April, Habito, the online mortgage company, is calling on UK homeowners to check their properties’ Energy Performance Certificate (or EPC) ratings, to potentially unlock lower mortgage rates.

Key considerations:
  • Officially, there are 2.2 million registered EPC ‘B’-rated properties and just 37,005 A-rated homes in the UK – BUT the ‘true’ number is likely to be much higher, since the official dataset only includes properties sold within the past 10 years
  • Having a rating of B and above could put homeowners in line to make significant savings on their mortgage rate, or sell for a higher property price, compared with similar D-rated homes
  • With the energy price cap lifted on 1 April increasing energy bills by an average of £693, Habito offers some quick energy efficient changes you can make to minimise the energy output in your home and improve your EPC

Alongside cheaper energy bills, homeowners with a higher EPC rating stand to make significant savings on their mortgage repayments. Habito research found that borrowers with an EPC rating of A or B could pocket savings of just over £86 a year – or £430 in total – over the course of their 5-year fixed rate green mortgage – when compared with C-G EPC rated property.

And yet, Habito found while there are officially 2.2 million distinct EPC ‘B’-rated properties and just 37,005 A-rated homes registered in the UK – the ‘true’ number is likely to be much higher, since the official dataset only includes properties sold within the past 10 years, and whose owners haven’t opted out from having the data appear publicly. Any homes sold before 2007, or which have had improvements since, are unlikely to have an accurate EPC.

This Earth Day, Habito has called for all homeowners to make sure they have an up to date EPC that accurately reflects any home improvements they’ve made, no matter how small. Habito believes many homeowners could be getting cheaper, green mortgage rates today, but aren’t aware of the options available.

Garreth Griffith, Habito’s Chief Impact Officer, says:

“Sometimes the difference between an EPC rating D and C is marginal. A lot of people think that you need deep pockets to make energy efficient home improvements when in fact we’ve found that there are many low cost improvements that can be made that ultimately could save hundreds, possibly thousands of pounds in utility bills and mortgage payments.”

Research carried out by Habito in November 20206 showed that awareness of ‘green mortgages’ – mortgages that reward borrowers with lower monthly repayments in return for energy-efficient home improvements – was low. Four in five (81%) mortgage-holders in the UK didn’t know what a green mortgage was. But when explained, 87% said they would be interested in a green mortgage, if it were competitively-priced and suitable for their needs.

Lenders are able to offer more affordable mortgage rates for energy efficient properties. Potential legislation in the buy-to-let sector, has seen the number of green products available to landlords jump from just four in March 2021, to more than 350 in April 2022. These deals offer higher borrowing limits to those with lower EPCs, encouraging landlords to invest in energy efficient upgrades to their properties.

EPCs are becoming increasingly important as the Government continues its mission to bring the UK’s housing stock up to an energy efficiency rating of C or above. The Department for Business, Energy and Industrial Strategy last year launched a consultation to explore how mortgage lenders could better use EPC data to make lending decisions in favour of more energy-efficient homes. In March 2020, the Chancellor, Rishi Sunak announced plans to offer 0% VAT on eco-home improvements.

But consumer awareness of EPCs is still low. Research from Habito in 2020 found that over a third of homeowners (36%) did not know the correct definition of a green mortgage, and a quarter (25%) thought the term only applied to new builds. Additional research by IHS Markit and NatWest in October 2021 found that only a small percentage of homebuyers considered EPC rating a very important factor if purchasing a home in the next 10 years – the fourth lowest among the 12 factors surveyed.

According to the English Housing Survey 2020, the percentage of homes in bands A-C, increased from just 12% in 2009 to 40% in 2019, with the South East region and London most likely to have A to C rated homes. The study also found that homes built post-1990 were more likely to cost less than £1,000 to improve to band C than other dwelling types, as were high rise and low-rise purpose-built flats. By 2019 almost half of all dwellings (49%) had some loft insulation, and around half (50%) of all dwellings had cavity or solid wall insulation, while 86% of homes in England had full double glazing, up from 73% of homes in 2009.

Daniel Hegarty, founder and CEO of Habito, said:

“We are living through a time where homeowners are facing a colossal rise in energy costs, which is pushing household finances to the limit.

“It’s clear that Government policies such as the Energy Efficiency Investment scheme, introduced to tackle the issue, won’t go far enough to support people and further schemes are needed to fully offset the energy squeeze that many households are experiencing. 

“However, if you want to see the recommended ways to improve energy efficiency for your home and you’re not sure of your current Energy Performance Certificate (EPC) rating, you can check it for free, online.

“This includes the breakdown of your property’s energy performance and the environmental impact of your property. Suggestions can include larger improvements, such as cavity wall insulation, but also cheaper ones – such as low energy lighting from £45. 

“If you’ve done any renovations to your home since you bought it – such as replacing the windows for double or triple glazing, or insulating the walls or roof – and not paid for a new EPC certification, you might be sitting on a small EPC goldmine. Getting a new certificate could mean you’re able to benefit from lower mortgage rates. 

“Of course, if you’re buying an A or B-rated home, or remortgaging, customers can now see more green mortgage options than ever before and should ask their broker how their higher EPC rating could help unlock green-mortgage deals.

“Alternatively, if 2022 is the year you make home improvements, rather than move, it could be worth costing-up eco-improvements into your plans, for the benefits of future financial savings.” 

Habito’s April 2022 data shows that nearly one in 5 (17%) of its remortgage customers were planning to use the money to finance home improvements.

Sustainable home improvements range from small low-cost everyday adaptations (such as switching to LED lightbulbs) to large building works (such as installing solar roof panels or wall-cavity insulation). Additional research into homeownership by Habito, found that when asked what elements make for a `forever home’, one in five respondents said solar panels (20%), followed by self-sufficient energy sources or heat pumps(15%) and electric vehicle charging points (14%).

Every UK property is given an Energy Performance Certificate or EPC which categorises your house in terms of its energy efficiency on a colour-coded scale from A-G with ‘A’ being the most efficient and the cheapest bills. The EPC is the only measure – available today – of a property’s energy efficiency. The document includes estimated energy costs, as well as a summary of the property’s energy performance-related features and is needed whenever a property is bought, rented or built and is valid for 10 years.

If you want to improve your EPC but don’t have thousands to spend on solar panels, here are some low-cost examples of what you could do:

1. Switch your lightbulbs 

Lighting a home accounts for about 20% of a typical electricity bill. Traditional or Incandescent were invented over 100 years ago and are extremely inefficient, wasting 95% of their energy and only using 5% to create light.

Switching over to an energy-saving LED bulb can make a huge difference to your overall energy bill.

Despite being potentially more expensive to buy, some suggest that even if left on for 12 hours a day, energy saving bulbs can go up to 11 years without needing to be replaced.

2. Put reflectors behind your radiators 

When you turn the heating on, lots of the energy is actually lost through the wall and to the street outside. Installing radiator reflectors can help with this.

These thin sheets of foil sit between the radiator and the wall, pushing up to 95% of the heat wastage back into the room.

Best of all, they are a small investment and easy to install – all you need is a pair of scissors and a measuring tape.

3. Upgrade your taps and shower heads

You may not realise that having a weak shower or tap can literally be pouring energy and money down the drain. Shower heads are all about flow, the number of gallons they deliver per minute (gpm).

Those with a lower gpm use less energy and by investing in a tap aerator – which is designed to increase water pressure, whilst reducing the flow from your tap – you can ultimately reduce the amount of water used.

4. Insulate your roof 

Insulating your roof is often much cheaper than you think and after a few years of use can pay for itself with the difference it can make to your bills. You can lay it between the beams that run along the floor (called the joists).

This option will keep the floors below you warm, though the loft space itself will still be chilly. You can also place it between the beams that support your roof (the rafters) to keep your roof space warm as well. This option tends to be more expensive than insulating the floor but is ideal if you want to continue using your loft space.

5. Get some smart power strips 

You may not know that even when you turn your devices “off” they are still using up as much as 16% energy which can cost as much as £86 a year.

A smart power strip will look like an extension lead but the key difference is that it cleverly stops power to devices not in use.

You can set them to turn off at certain times, when your electronics are inactive, via remote switches or following the lead of a “master” device (if this one’s off, power stops to all the others). They generally cost less than ~£30, so is a great inexpensive and green option!

 

For more tips and money-saving advice visit the Habito Hub.

 

Kindly shared by Habito

Main article photo courtesy of Pixabay