Mortgage warning for anyone who owns a home built before 1919

Halifax has announced a new scheme that will allow it to decide how much it is willing to lend for a property.

Owners of older, draughtier properties could face a new penalty under Britain’s net zero emissions policy. Halifax has unveiled a new system in which the amount it is willing to lend for a property will be influenced by its green rating, as determined by its energy performance certificate (EPC).

Properties with poor EPC ratings are presumed to be more expensive to maintain in terms of heating, hot water and cooking, implying that potential buyers would have less money to pay off their mortgage. These considerations will influence how much banks and building societies, such as Halifax, are willing to lend – and some areas of the UK still have large numbers of these older homes.

Analysts fear the change, which is expected to be adopted by other financial institutions, could result in a two-tiered market favoring newer properties over older ones, which may not have the same level of insulation, double glazing, solar panels or heat pumps. alternatives to central heating. In the future, it may become more difficult to obtain loans for homes built before 1919, where installing eco-friendly improvements aimed at reducing energy bills and operating costs could cost tens of thousands of dollars. books.

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The energy efficiency of a property is rated with an EPC, ranging from A to G, with A being the most efficient. Customers with higher EPC ratings, such as A or B, are expected to have lower energy costs and therefore may see a small increase in the maximum loan available on the property.

However, those who purchase a property with a low energy efficiency rating, such as F or G, could be given a reduced loan amount, according to Halifax. Theoretically, buyers of older, poorly insulated homes might not qualify for larger loans, which could lead to lower prices for these properties.

Lenders’ decision to use energy performance certificates (EPCs) to determine home loans is likely to spark controversy due to concerns about their reliability. Consumer group Which? called EPCs “inaccurate”, and former housing secretary Michael Gove highlighted “weaknesses” in the rating system which lead to “perverse results”.

Halifax’s move is part of a wider shift in the housing market aimed at encouraging property owners to reduce their household energy consumption in a bid to meet net zero emissions targets. In another development, Energy Secretary Ed Miliband has reintroduced green targets for property investors, including buy-to-let landlords, who will be required to upgrade their buildings to a minimum grade of C by 2030.

The changes in Halifax mean there will be no change to the loan available for properties classified as C, D or E or where the EPC is unknown. This new approach has sparked fears that buyers and sellers of older properties would be unfairly penalized.

Alice Haine, of Bestinvest by Evelyn Partners, told the Telegraph: “Green improvements can be very expensive and, while encouraging homeowners to make better choices is beneficial for the overall energy efficiency of the country’s housing stock, it risks to create a two-tiered market where only those with the deepest pockets or those with the newest homes can benefit. »

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The market could become skewed towards those with deeper pockets or owners of newer properties, Ms Haine warns. She further warned that this could have a negative effect on the property market, saying: “With the risk that older properties which require greater investment will see their value fall, owners could be deterred from sell, for fear of not getting the price. they want. This could create a traffic jam in the market.

Matt Thompson, of estate agency Chestertons, suggested that EPCs will become a “focal point” for buyers and highlighted that areas with a high proportion of older properties, such as London, could be hit harder. For example, in Haringey, north London, 54.3% of properties were built before 1919, according to the Health Foundation.

Mr Thompson added: “Buyers have already been constrained by interest rates. If they are constrained by EPCS, they will have to compromise even more on what they can buy.”

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Earlier this year, consumer watchdog Which? has called for an overhaul of the EPC system, saying the grades are “inaccurate”. He argued that EPC ratings confuse homeowners, landlords and tenants, leading some landlords to spend thousands of dollars on energy-efficient improvements. The Office for National Statistics reports that around eight million homes in England and Wales have an EPC rating of C or below.

SAM Conveyancing’s Andrew Boast said Halifax’s decision to tie home loans to EPC ratings will slow the property market. He commented: “Older homes, which often make up the bulk of F and G listed properties, are likely to be disproportionately affected. These homes already have higher maintenance and operating costs, and Halifax’s change will further increase the financial barrier for potential buyers and sellers. »

Amanda Bryden, from Halifax, said: “We know that in general, more energy efficient homes cost less to run. Using EPC data and energy bill analysis, we are able to reflect this in mortgage affordability.