Halifax Intermediaries - Using a property’s EPC rating in our affordability calculation
06 December 2024
What’s new?
From Tuesday 10 December, we will be using a property’s Energy Performance Certificate (EPC) rating in our affordability calculations.
We are now able to better reflect the impact of home energy costs, and some of the financial benefits of more energy efficient homes. We continue to support customers looking to improve the energy efficiency of their properties, with our Green Living Reward cashback proposition and our partnerships with heat pump, solar panel & insulation installers.
Affordability
Within our affordability model, assumed ‘cost of living’ values are already incorporated, which include energy costs. This adjustment reflects a more tailored view of these costs.
A customer whose property has a higher EPC rating (e.g. A/B) will generally have lower energy costs than those with a lower EPC rating (F/G) on like-for-like use.
For properties with an A/B EPC rating (c.15%) you may see a small increase in the maximum loan amount available and for properties with an F/G EPC rating (c.3%), a small decrease. There is no change to the maximum loan available for properties with a C, D or E EPC rating or where the EPC is unknown.
How to key
From Tuesday 10 December, our Mortgage affordability calculator will collect an EPC rating and the maximum loan result displayed will be based on the EPC rating selected.
You can also select the EPC rating when keying a Decision in Principle (DIP) or leave as ‘Please Select’ if the EPC rating is not known.
Key information
In addition to purchase and remortgage applications, EPC ratings will also be used in affordability for further advance (FA) applications and product transfers (PT), where a full affordability assessment is required.
The Application Summary document produced upon submission of an application will now include a section recording the EPC details submitted on the application.
For New Build properties we will accept a ‘predicted’ EPC rating keyed (based on a Predicted Energy Assessment (PEA) or Standard Assessment Procedure (SAP) rating).
More details
Following analysis of our customers’ energy costs, we as a responsible lender, have improved our affordability calculations by adjusting the energy cost inputs within our affordability model, based on the energy efficiency of our customers’ properties.
There are no other changes to policy or our affordability rules and existing loan to income (LTI) caps will still apply.
There are no changes to when we will request proof of the EPC rating and this is only required when EPC information has manually been keyed and a Green Home product has been selected.
These changes apply to applications started from Tuesday 10 December and will not apply to any application started before this date. If a Decision in Principle (DIP) was keyed before 10 December and the application is converted to a full application on, or after, this date these changes will not apply.
Comment by Amanda Bryden, head of Halifax Intermediaries and Scottish Widows Bank:
“We know that typically, more energy efficient homes are cheaper to run. Using EPC data and energy bill analysis, we’re able to reflect that in mortgage affordability.”
Additional background
- A home’s energy efficiency has an impact on energy bills which, in turn, has an impact on disposable income.
- This change has been informed by detailed analysis of Energy Performance Certificate (EPC) ratings, energy transaction and mortgage data.
- Borrowers buying:
- The most energy efficient homes, i.e. EPC A & B rated, will see an increase in the amount we’re able to lend. Around 15% of UK homes are currently A or B rated.
- Homes with the lowest energy efficiency ratings, i.e. EPC F & G, will see a small reduction in the maximum loan amount. Around 3% of UK homes are F or G rated
- EPC C, D & E rated homes will see no change to the maximum loan amount
- Lloyds Banking Group (Halifax. Lloyds Bank and Bank of Scotland) offers support for existing homeowners wanting to improve the energy efficiency of their homes through Green Living Rewards, which offers up to £2000 cash back on a range of energy efficient home improvements.
- Lloyds Banking Group (Halifax. Lloyds Bank and Bank of Scotland) also offer a range of incentives on heat pumps, solar panels and insulation through partnership arrangements.
Visit us online
www.halifax-intermediaries.co.uk
