Levering Economics for New Drivers to Energy Reduction & Sustainability
The LENDERS project is demonstrating that more accurate fuel cost estimates can be used in mortgage lending decisions that results in lower energy homes being responsibly allowed larger mortgages.
The LENDERS project looks to improve the accuracy of the estimated fuel costs that mortgage companies use when calculating the monthly loan repayments that a homeowner can afford to repay. This “Affordability Calculation” currently uses Office of National Statistics average fuel bill data, in some cases modified by a other factors, to predict a homeowners fuel costs. The LENDERS idea is that this forecast can be made more accurate by using data from Energy Performance Certificates (EPC) alongside other information the mortgage company would have access to.
If adopted, the LENDERS approach means that mortgage companies are better able to predict the other ‘unavoidable’ costs their customers are likely to incur, and in doing so better predict what they can afford to repay. This helps support responsible lending, it also means due to lower fuel bills, lower energy homes will have lower other ‘unavoidable’ costs are can therefore afford to repay higher mortgage repayment amounts without increasing their overall outgoings. This, in turn, leads to the capacity to deliver high capital lending amounts.
The larger mortgages available for lower energy homes are hoped to stimulate an awareness in consumers of the benefits of buying a greener home and, longer term, this increase in demand should help drive (via values and speed of sales) the housing market and house builders to provide more energy efficient homes and increase the value of such homes. It may also help encourage homeowners to invest in improving energy efficiency building solutions by enabling the mortgage market to more accurately reflect fuel costs in lending offers. This could be useful for re-mortgages to undertake energy refurbishment projects, where the realised savings in fuel costs enable the additional mortgage repayments.