How a low EPC Rating can Affect Mortgage Applications

Buying a home can be a stressful process, particularly for first time buyers, and you want it to go as smoothly as possible. A scenario - you’ve put in a mortgage application, you’ve provided proof of funds, you have done everything you need to and met all the criteria, only to find your application is rejected because of the energy performance rating of the property you want.  

It may sound like something we’re making up, but it isn’t. One often overlooked but critically important aspect is the EPC when it comes to mortgage lending, and it can have a substantial impact on securing a mortgage. 

What are EPC Ratings? 

An EPC rating is a measure of a property's energy efficiency, graded from A to G, with A being the most efficient and G the least. Most UK properties are rated as a D. The EPC assessment takes into account various factors such as insulation, heating systems, windows and build type. The aim of EPCs is to provide potential buyers with information about the property's environmental impact and estimated energy costs. Legally a valid EPC is required when selling a property although there is no minimum rating requirement, while landlords letting out a property must also have a legally valid EPC with a minimum rating of at least an E. 

Impact on Mortgage Approval 

In recent years, environmental considerations have become increasingly significant in various industries, and the mortgage sector is no exception. Lenders are becoming more conscious of the environmental impact of the properties they finance. A low EPC rating signals higher energy consumption and, consequently, a greater carbon footprint. This can be perceived as a risk by mortgage lenders, influencing their decision-making process. 

Higher Energy Costs and Affordability 

Low EPC ratings usually mean higher energy costs for the homeowner. Lenders may factor in these increased expenses when assessing the borrower's ability to meet mortgage payments. The lender may feel that a property with a low EPC rating could mean higher bills, straining the homeowner's budget and presenting a risk to allocate sufficient funds for mortgage repayments. This financial strain raises concerns for lenders, potentially impacting the mortgage approval process. 

Investing in a property with a high EPC rating not only improves the chances of mortgage approval but also future proofs the investment. As energy-efficient homes become more desirable, properties with lower EPC ratings may experience reduced resale value. Homebuyers are increasingly prioritising sustainability, making energy-efficient homes a more attractive option. 

The Energy Performance Certificate rating has emerged as a critical factor influencing mortgage approval. Homebuyers, and indeed sellers wanting to secure the sale, should be aware of the potential impact of a low EPC rating when it comes to mortgage applications.  

Advice and Guidance on Improving EPC Ratings 

There are ways to improve a property EPC rating. These can often be through simple non expensive changes, but also some more costly ones.  

Silver Arch Property Solutions offers an EPC consultancy service which involves an assessment of your current property rating and suggested measures you can do including those that may not be listed on an existing certificate.  

If you require an EPC, either on the Isle of Wight or in Hampshire, or an EPC consultation, contact us today by emailing info@silverarchps.co.uk or call 07368838213. Alternatively use the contact form on the website.