Leeds Building Society improves affordability assessment for EPC A and B-rated new homes

Leeds Building Society will factor in energy cost savings on mortgage applications for most energy-efficient new builds

Enhanced affordability for mortgages on the most energy-efficient new homes is the latest initiative by Leeds Building Society to benefit buyers of greener homes.

The Society is now able to use more detailed data about projected fuel bill savings for new build homes with an A or B EPC[i] rating, enabling customers to borrow more than on an equivalent, less energy efficient property[ii].

“Through purchasing energy-efficient new build homes, customers are not only helping the environment but realising the benefit of lower fuel bills at a time when everyone is affected by the rising cost of living,” said Martese Carton, Leeds Building Society’s Director of Mortgage Distribution.

“Our improved affordability assessment for this type of property demonstrates the potential savings on energy bills where properties are A or B EPC rated, and what this can mean to a household’s outgoings, such as mortgage repayments.

“This is the first step for us in refining our affordability assessments in this way, as we seek to make greater use of this kind of very detailed data to bring home ownership within reach of more people while continuing to lend responsibly.”

The move was welcomed by Barratt Homes. Adrian MacDiarmid, Head of Mortgages at the country’s largest developer, said: “New homes are built to high energy efficient standards so it makes sense that the savings on bills are reflected in affordability. We put great store in this with 99% of the homes we build either A or B rated.

“There is an increasingly compelling case for lenders to offer support in this way to the growing number of customers who want to buy an energy efficient home.”

This latest innovation is part of work by Leeds Building Society as it develops new ways to support its members in reducing their carbon footprint. Housing is responsible for 16% of the UK’s total emissions[iii].

Last year, the Society introduced green mortgage deals offering preferential rates and cashback deals for the most energy-efficient homes, as part of its efforts to link its products with positive environmental impact.

The mutual was also the first UK lender to offer a carbon neutral mortgage, where it offset the forecast environmental impact of each home[iv] during the initial fixed term of the mortgage. This benefit was offered on a trial basis on all its 95% LTV (loan to value) mortgages for purchase, regardless of EPC rating.

[i] EPC = Energy Performance Certificate

[ii] For illustrative purposes: a customer seeking a mortgage up to 95% LTV (loan to value) against the share of a new build shared ownership property valued at £195,000 could borrow £185k versus £181k on a non-new build property

[iii] Source: 2020 UK Greenhouse Gas Emissions, final figures (publishing.service.gov.uk)

[iv] To offset the amount of carbon produced by heating/lighting/power usage by a typical Leeds Building Society property calculated at 4.2 tonnes of carbon per annum