Planning to apply for a loan to purchase your new home? Then it’s important to pay attention to the energy rating of the property. Banks are now required to check the energy performance of homes when applying for a mortgage, through the Energy Performance Certificate (EPC). Homes with a poor energy rating could make it more difficult to secure financing.

Banks Legally Required to Request the EPC Certificate

Since last year, banks are legally obligated to request the EPC certificate of a property when a loan application is made. This is because homes with poor energy performance can lose value, especially if an inflated price was paid for an energy-inefficient property. If a borrower defaults on their loan, it can lead to a loss for the bank.

With soaring energy prices, this issue becomes even more pressing. People living in energy-draining homes are hit harder by rising energy costs, which increases the likelihood of them being unable to repay their loan. This creates an additional risk for banks. That’s why the National Bank has recently urged banks to ensure they are properly requesting EPC certificates. However, in practice, this isn’t always being done yet.

Will Loans Become More Expensive for Energy-Intensive Homes?

Despite the increased checks, the National Bank has stated that the goal is not to make loans more expensive for energy-hungry homes. The main objective is to limit the risk for banks. Banks cannot reject a loan application solely based on the EPC rating, but it does play a role among other factors in the decision-making process. However, the importance of the energy rating may become more significant over time.

Borrow More to Renovate?

Some organizations, like the Confederation of Construction, are advocating for the ability to borrow more when purchasing a home. The idea is to allow buyers to immediately renovate an energy-inefficient property to improve its energy performance. However, the National Bank is not enthusiastic about this proposal, as borrowing more means increased risk for banks.

It remains to be seen whether, in the future, it will become more difficult to secure a loan for a home with a poor energy rating. However, the EPC certificate is likely to play an increasingly important role in the mortgage approval process.

In Summary: The Impact of Energy Rating on Your Mortgage

When applying for a mortgage, it’s crucial to understand the impact that the EPC rating has on securing financing. Since banks are required to verify this rating, it plays a role in determining whether a loan will be approved. While the energy rating is not the sole determining factor, it is likely to become more influential in the future. Therefore, it’s wise to consider a property’s energy performance before applying for a mortgage.