In the trade body’s Net Zero Homes report, it posited that minimum energy efficiency requirements be introduced for owner-occupier homes which would be required for sale or remortgage.
It said stamp duty adjusted for energy efficiency could increase the demand for sustainable homes and encourage homeowners to retrofit their properties. This could come in the form of stamp duty rebates for those who retrofit their homes within two years of purchasing.
UK Finance proposed for this to be phased in between 2030 and 2050 with exceptions for vulnerable populations which could otherwise become “property prisoners”.
EPC rating ‘often outdated’
UK Finance said EPCs focused too much on the fuel cost of heating a property while recommendations tended to be overlooked. It said data should be updated in real time when energy efficiency improvements are made rather than quarterly, so lenders can factor this into decision making.
It said: “Updates to home energy efficiency do not always translate to an updated EPC rating and therefore EPC ratings are often an outdated representation of energy efficiency.
“There is a significant time-lag in the EPC database, with register data published every four to six months. This time-lag limits the usefulness of the EPC database for making decisions, for example when lenders utilise the data to assess the EPC performance of their portfolios.”
UK Finance also said there were concerns over the consistency of EPCs and their use as a tool to plan property upgrades. The trade body said the current measure did not account for emerging heating technologies and noted that many homes did not have an EPC rating at all.
Upfront costs and awareness
The body also urged the government to provide grants for vulnerable populations which would cover the full upfront costs of energy efficiency improvements and low-carbon heating systems. For households which are able to pay for improvements, UK Finance said a smaller grant could be offered alongside an interest-free or low-interest loan to cover the rest of the costs.
It noted that upfront costs to retrofit a home was a barrier to 45 per cent of people.
The report said this meant mortgage lenders needed to do more than green their balance sheets but help to improve housing stock with an “inclusive transition”.
While there are more green finance options for homeowners available, UK Finance said there had been limited take-up because of a lack of consumer awareness, understanding or reluctance due to costs.
It added: “The role of the mortgage adviser in educating and informing home buyers, landlords and remortgagors should not be underestimated.”
The report acknowledged that lenders were not “solely responsible” for resolving the issue however, noting that 35 per cent of homes were mortgage-free or owned outright.
UK Finance also said green mortgages alone would not encourage efficiency and as of April 2022, some rates were “inferior” to standard mortgages.
‘Climate change is number one priority’
David Postings, chief executive of UK Finance, said: “Climate change is the number one public policy priority facing this and future generations. The challenge we face means we can no longer just consider our options, but instead need to see strong action. In housing, this means addressing the impact of heating the UK’s 28 million homes.
“Our new report sets out a range of recommendations to help deliver net zero in the UK’s housing stock, ranging from supporting vulnerable people with the costs of energy efficiency improvements to providing grants and subsidies to upskill tradespeople.
“The banking and finance sector is playing, and will continue to play, a key part in facilitating the transition to net zero. The transition must be done in a fair way that that does not leave anyone behind, which is why we believe that in order to make real progress everyone must work together, led by clear, decisive and supportive government action.”
