IMLA criticises govt’s energy rating proposals

New government proposals requiring lenders to report on the energy ratings of properties they lend against risk wasting time and resources, the Intermediary Mortgage Lenders Association (IMLA) has warned.

In its response to the Department for Business, Energy and Industrial Strategy (BEIS) consultation on improving home energy efficiency through lenders, IMLA suggested the housing and mortgage markets have an important role to play in addressing climate change.

However, the trade body has suggested that BEIS’s proposals could lead lenders to spend disproportionate time and effort ensuring their average energy ratings are at an acceptable level.

The Association also announced its concern that the compilation of an energy efficiency “league table” could cause lenders to base their lending decisions on a property’s energy efficiency, rather than on a borrower’s needs.

IMLA executive director, Kate Davies, said: “Lenders are taking the challenges posed by climate change very seriously, which is why many have already made significant moves to understand and prepare for the most immediate risks posed by our changing climate.

“They also recognise the important role the mortgage market has to play, with a growing number now offering ‘green mortgages’ to incentivise consumers to improve their property’s energy efficiency.

“However, these latest proposals from BEIS are highly unlikely to bring about real change. Rather, they would oblige lenders to devote way too much time compiling and disclosing data in an exercise which – at the end of the day – won’t change a single low-energy lightbulb.”

The consultation from BEIS, which closed on 12 February, proposed that lenders should annually disclose portfolio-wide Energy Performance Certificates (EPC) data, as well as the gross value of lending for energy improvement works. The government hopes that these measures could allow comparisons to be made between lenders and provide a picture of how energy performance could influence lending decisions.

However, IMLA has rejected the “clear implication” in the consultation that lenders, rather than property owners, are responsible for the energy efficiency of the properties mortgaged to them.

The trade body is arguing for a thorough review of EPC to ensure they are “fit for purpose”, and suggested that property owners should be required to obtain an EPC. All inspections should be carried out by appropriately qualified assessors, IMLA added, with the results held on a central, easily-accessible database.

“It makes more sense to ensure that property owners have really accurate information about the energy efficiency of their property – and the best place to start is by ensuring that EPCs are really fit for purpose,” Davies continued.

“If a property’s energy efficiency is reflected in its value, homeowners will be incentivised to make improvements – which can be financed by a combination of loans, for those who can afford them, and government grants to help those who cannot.

“It makes no sense to create artificial competition between lenders which could result in their avoiding lending on properties that are less energy-efficient and therefore less desirable. In the worst case this could lead to some borrowers being unable to re-mortgage or sell. It is critical that this is avoided.”

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