Borrowers will be able to take out a bigger mortgage when buying greener properties for the first time, under a pioneering scheme to encourage energy efficiency.
Research has found that factoring in the efficiency of a home into lenders’ affordability calculations could allow them to increase loans by £11,500 because buyers’ electricity and gas bills will be lower.
That theory will become reality from June, when Welsh help-to-buy loans will take into account the energy rating of new-build homes worth up to £300,000.
The move is one of several innovations being mooted to overcome householders’ inertia on energy efficiency, alongside tax cuts for greener homes.
The Welsh government said the change should open up the housing ladder to more people and encourage buyers to consider energy ratings.
Rebecca Evans, Wales’s housing minister, said: “We hope to see lenders follow our lead and making energy efficiency part of the mortgage consideration for all homebuyers in Wales.”
The Building Research Establishment, which has undertaken research into green mortgages, said it hoped banks and building societies would wake up to the importance of factoring energy use into lending decisions.
Andrew Sutton, the group’s associate director, said: “My primary hope is that the mortgage industry reacts.”
He said lenders were aware there was a growing argument to factor energy efficiency into their decisions but they were understandably nervous about moving first, and the costs of implementing the changes.
Barclays is one of the first to offer a green mortgage product, offering borrowers a discount on the loan’s interest rate on new-builds rated in the top two energy bands, A and B.
However, Sutton said the approach also had big potential for existing homes. For example, a homeowner wanting to borrow £10,000 extra on their mortgage for a loft conversion could potentially borrow more if during the work they put in insulation that took the property from an E-rated home to a C-rated one.
Such incentives could change the “my home is my castle” mindset that has held back efficiency improvements in privately owned homes, Sutton said.
Other carrots have been suggested in recent years to encourage householders to install insulation, from lower stamp duty for efficient homes to council tax discounts for greener properties.
Richard Twinn, senior policy adviser at UKGBC, said the Welsh green mortgage scheme was symbolically hugely important but stamp duty would be the real gamechanger.
“Stamp duty is probably the single most effective mechanism the government has to apply to this,” he said.
The plan would be revenue neutral for the Treasury because duty discounts for buyers choosing more efficient properties would be offset by people paying extra for draughty, inefficient ones.
The government is due to announce new policies later this year, potentially in the autumn budget, on how to encourage people to make their homes more efficient.
However, Twinn cautioned against high expectations, saying small trials were likely rather than a “big bang” on stamp duty incentives.