Halifax warns homeowners with houses built before this year could face penalties

Homeowners dealing with older, less energy-efficient properties could face new penalties as part of the UK's net zero initiative. Halifax has introduced a new system that will determine its lending amount based on a property's Energy Performance Certificate (EPC) rating.

Properties with poor EPC ratings are presumed to have higher running costs for heating, hot water, and cooking, which would leave potential buyers with less money for mortgage repayments. These factors will be considered when banks and building societies, like Halifax, decide their lending limits.

This change, expected to be adopted by other financial institutions, could lead to a two-tier market favouring newer properties over older ones lacking in insulation, double-glazing, solar panels or heat pumps. It may become more challenging to secure loans for homes built before 1919, where significant investment may be required to make green improvements and reduce energy bills.

A property's energy efficiency is graded from A to G on an EPC, with A being the most efficient. Customers with high EPC ratings, such as A or B, are assumed to have lower energy costs and may see a slight increase in the maximum loan available on the property.

Halifax has warned that homebuyers seeking properties with low energy performance ratings, such as F or G, may face reduced loan amounts. This potential clampdown could result in the devaluation of less insulated and older properties, making larger loans out of reach for some buyers, reports the Express.

The use of Energy Performance Certificates (EPCs) by mortgage lenders is expected to stir controversy, as doubts have been cast on their accuracy by the consumer watchdog Which?

, and "weaknesses" in the system have been highlighted by ex-housing secretary Michael Gove, known for driving "perverse outcomes". This measure by Halifax is reflective of a broader trend in the housing sector, aimed at incentivising homeowners to reduce energy consumption in efforts to meet net-zero objectives.

Energy Secretary Ed Miliband has also reintroduced stringent environmental standards for property investors, including buy-to-let landlords, compelling them to work towards achieving a minimum EPC rating of C by 2030. According to Halifax, loans for homes with ratings between C and E or instances where an EPC is not available will remain untouched.

Nonetheless, this new stance raises concerns about potentially discriminatory effects on transactions involving older buildings.

Alice Haine, from Bestinvest by Evelyn Partners, expressed her concerns to the Telegraph, stating: "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."

She warned that this could have a detrimental effect on the housing market. Haine further commented: "With the risk that older properties that require more substantial investment could see their values plummet, owners may be deterred from selling for fear they won't secure the price they want. This could create a log jam in the market."

Matt Thompson, from estate agency Chestertons, mentioned that Energy Performance Certificates (EPCs) will become increasingly important to buyers, especially in areas like London with many older properties. For instance, in Haringey, north London, over half the properties were built before 1919, as per data from the Health Foundation.

Thompson observed: "Buyers have already been squeezed with interest rates. If they're squeezed by EPCS, they will have to compromise even further on what they can buy."

Earlier in the year, consumer watchdog Which?

called for a revamp of the EPC system, criticising it for being "inaccurate" and confusing for homeowners, landlords, and tenants, leading some to invest heavily in energy-efficient improvements.

The Office for National Statistics has revealed that approximately eight million homes in England and Wales have an Energy Performance Certificate (EPC) rating of C or lower. Andrew Boast, from SAM Conveyancing, has expressed concerns that Halifax's decision to link home loans to EPC ratings could slow down the housing market.

He stated: "Older homes, which often makeup the bulk of the F- and G-rated properties, are likely to be disproportionately affected. These homes already come with higher maintenance and running costs, and Halifax's change will further compound the financial barrier for prospective buyers and sellers."

Amanda Bryden, a representative from Halifax, commented: "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."