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First-time buyers in Wales to get larger loans for energy efficient homes

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Written by: Lana Clements
10/05/2018
First-time buyers in Wales using the government’s Help To Buy scheme could be offered larger equity loan sizes when they buy a home with smaller energy bills, in the first step towards energy efficiency improving mortgage affordability.

Under new legislation, buyers from June will have the energy efficiency of a new build home reflected in their Help To Buy equity loans, which form part of the deposits on the scheme.

It comes after research by the Lenders project, a consortium of lender and property partners, last year showed that smaller energy bills could improve mortgage affordability and provide access to a larger loan.

If the same change was adopted for the main mortgage loan, it could vary maximum lending amounts between the most and least efficient homes by up to £11,500, according to the study.

First of more changes

The legislation makes Wales the first UK country to offset mortgage lending against the energy efficiency rating of the property, although the main loan will still be assessed in the traditional method.

Loans will be administered by the Development Bank of Wales and are set to be just the first step towards the changes the findings will create in the mortgage industry, according to the Welsh government.

Rebecca Evans, Wales minister for housing and regeneration, said: “We know that energy spending can be a major household outgoing, which is why we want to make energy efficiency part of the consideration when people look to buy a home in Wales.

“We hope to see lenders follow our lead by making energy efficiency part of the mortgage consideration for all home buyers in Wales.”

Andrew Sutton, associate director at research group BRE Wales, which managed last year’s research, added: “This announcement is a great step for the Lenders project outcomes and fantastic news for first-time buyers in Wales.

“The more accurate forecasting provided by the research will help many onto the housing ladder who might have struggled to obtain a mortgage previously, and the research we will do in parallel with the adoption should help other financial institutions better understand the practicality of implementing.

“I am delighted to see the Lenders project translated from research into reality and I hope to see other mortgage lenders follow suit.”

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