HALIFAX is making a big change to mortgage rules from today affecting how much millions can borrow.
One of the UK’s biggest lenders will start using properties’ Energy Performance Certificate (EPC) ratings when deciding how big a home loan to offer borrowers.
Halifax is making a major change to lending rules from today[/caption]
An EPC is a document that ranks how energy-efficient your home is, with A the most efficient and G the least.
Properties with EPC ratings of A and B will be able to get bigger home loans from Halifax.
Meanwhile, homes with the lower F and G ratings will see a reduction in the maximum loan amount offered.
Properties with EPC’s of C, D or E will not be included in the change coming into effect from today.
The new rule will apply to all buying, remortgage or further advance mortgages where a full affordability assessment has been carried out.
This is where a number of factors are evaluated before you are offered a mortgage, including your income, credit history and any existing debt you may be in.
Following today’s changes, Halifax said someone looking for a mortgage on a property valued at £215,000 could borrow £194,000 if the property had an EPC of A or B compared to £191,000 if the EPC was C-E or £190,000 if it was F or G.
Amanda Bryden, head of Halifax Intermediaries and Scottish Widows Bank, said: “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.”
Is it good or bad news for the market?
Halifax is believed to be the first lender to factor in EPC ratings when calculating mortgage affordability for borrowers.
How to get the best deal on your mortgage
IF you’re looking for a traditional type of mortgage, getting the best rates depends entirely on what’s available at any given time.
There are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.
To find the best deal use a mortgage comparison tool to see what’s available.
You can also go to a mortgage broker who can compare a much larger range of deals for you.
Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.
You’ll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee – sometimes more than £1,000 – to the cost of the mortgage, but be aware that means you’ll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statements.
Nick Mendes, mortgage technical manager at broker John Charcol, said the change was a “positive shift in the market”.
He explained: “It makes a lot of sense, given how energy efficiency directly impacts household energy bills and, in turn, a borrower’s disposable income and ability to meet mortgage repayments.
“By rewarding borrowers for purchasing sustainable homes, Halifax is creating a system where financial incentives and environmental benefits go hand in hand.
“Borrowers are empowered to make greener choices, knowing it could boost their borrowing capacity and reduce their ongoing costs.”
Nick said the change was also good news for homeowners living in properties with high EPC ratings and looking to sell.
“Homes with an A-C EPC rating typically achieve higher sale prices, so improving a property’s energy efficiency becomes a dual benefit: it’s environmentally conscious and financially savvy.
“This policy gives homeowners even more reason to invest in energy-saving improvements, making their properties not only more appealing to buyers but also more sellable in a market increasingly focused on sustainability.”
However, David Hollingworth, from L&C Mortgages, warned those in properties with lower EPC ratings, many of them older builds, may struggle to sell on.
He explained: “Looking ahead, as greater efficiency is targeted it could ultimately start to make the very lowest rated harder to sell.”
Meanwhile, Alice Haine, at Bestinvest, told Property Industry Eye: “Green upgrades can be very expensive and while incentivising homeowners to make better choices is beneficial for the overall energy efficiency of the country’s housing stock, it risks creating a two-tier market where only those with the deepest pockets or those owning the newest houses can benefit.”
If you’re with Halifax and aren’t happy with the changes it is bringing in, you could try getting a mortgage with another lender.
In other news, Barclays, NatWest and TSB cut rates this week but interest costs are creeping up.
Plus, house prices hit a record high in November as buyers rush ahead to buy ahead of major stamp duty changes.
