How do you Value a Home: Really?
The LENDERS Project, a ground breaking research project backed by Nationwide, CEW, the BRE and Principality and others is looking into ways to link the energy performance of a home to its mortgage affordability.
19th February 2016
A home is usually the biggest financial asset anyone will possess. But despite recent tightening up of mortgage lending practices, the financial checks to see whether you can afford to pay your mortgage AND heat your home are remarkably weak.
Current mortgage lending makes a crude assumption of energy used through adjustments to the Office of National Statistics figures. Some lenders also use fuel bills from your current property – helpful for re-mortgages, but clearly dangerously misleading for those moving homes to a more or less efficient property. All this means that you could end up with a combination of fuel bills and mortgage repayments significantly higher than the mortgage company assumed when they decided what you could afford to repay.
The LENDERS project seeks to demonstrate at scale that the information required to make a more accurate estimate of your future home’s fuel bills is already available. By demonstrating how this can be used, and proving its reliability, the project plans to provide the mortgage industry with an improved method of making sure home owners can afford both their mortgage and their fuel bills.
As a result of the LENDERS project, an energy efficient home with consequently lower fuel bills would leave the home-buyer with proportionally more of their income available to repay the mortgage. In turn, this extra money for repayments means they can afford larger repayments and therefore a larger overall mortgage, all without increasing the combined costs of the mortgage and fuel bills that the home owner pays overall.
This is a radical step by our whole built environment industry and wider stakeholders to encourage people to look harder at the homes they want to buy and live in. We all need to look beyond just kerb appeal and the interior decor. We need to consider how a home performs at its core level – keep us warm in the winter and cool in the summer. As an industry we need to ask a series of questions. How efficient are our homes that we manage, maintain and provide for consumers; how can we educate the homeowners to take more responsibility; and then how can we build an overall connection between performance and value?
Watch out for more information as the LENDERS Project develops via the CEW website, our newsletter and publicity in the media.