20 March 2022

Why choose a sustainable home?

By Chris Martin, Danske Bank UK

Climate change is such a huge, global issue, that it would be easy for individual homeowners to think that the sustainable choices they make in their own homes won’t really make much difference.

But with an increasing number of green or climate friendly mortgages coming into the market, including Danske Bank’s own Carbon Trust-certified Carbon Neutral Mortgage, it is clear that sustainability is a priority for lenders and that climate change is going to have a big influence on products and policy in future.

If we look at the impacts of climate change through the lens of a typical home, it quickly becomes clear that choosing sustainable options has a number of benefits for both the homeowner and the environment.

Lower Emissions

When you go to sell or buy a house the property needs an Energy Performance Certificate which show how energy efficient a home is and what level of emissions it generates. EPCs aren’t a perfect tool, but they are a useful method of comparison, ranking homes in categories A to G (best to worst).

Research into our mortgage portfolio in Northern Ireland shows the change in emissions across the various EPC categories rise by up to seven times for an EPC G rated property compared with a more efficient EPC B rated one.

Lower Energy Costs

The emissions from a property are generally linked to the type of heating systems (oil and gas) and the thermal efficiency of the property, which leads to the second benefit of choosing a more sustainable home – lower energy costs.

ONS research for England shows that the median energy costs of a G rated property are almost 4.5 times higher than a C rated property and if you compare this to a B rated property it’s almost 6.5 times higher.

That converts to a cost saving of almost £2,000 a year (or £167 per month) between a G rated property and a B rated property – which raises an interesting question as to whether EPC should have a bearing on affordability calculations.

Again this impacts homeowners and our customers through higher costs to run and maintain their house (especially if it’s D-G)

House Price Rises

There are also potential impacts on long term property values linked to sustainability factors and in fact there is already emerging evidence of a variance in values between properties rated A-C compared with those rated D-G.

Research undertaken by Cambridge University and published by the Government is showing the potential for an up to 14% valuation variance between an A/B rated property and a G rated property.

What the research doesn’t show is if the 14% is a premium on the ‘standard’ property price or if the 14% is a reduction. Either way for most people our home is our biggest asset, so a 14% variance is very significant.

Smart Choices

In the medium to long term, the risk of not addressing this challenge is that a house could end up becoming what’s known as a stranded asset – one that is so severely impacted by climate change that its value falls significantly and is no longer viable.  

Let me give you an example – my last house was a 3-bed semi in east Belfast. It was built in the mid-1920s and was single skin red brick with no cavity and not even any felt between the roof slates and the timbers. The property has an EPC rating of F that could be very difficult or costly to improve significantly. That house has the potential to become a stranded asset as it could be too expensive to run, too costly to improve and ultimately too high a risk to lend money against.

That’s why it’s increasingly important for homeowners to understand the potential improvements they can make to their property to not just protect against any valuation variance but also to reduce their energy costs. We’ve just partnered with the Energy Saving Trust to launch a tool which helps homeowners estimate their current EPC, energy costs and carbon emissions and helps them to understand, based on the budget they have available, how they can improve each of those areas.

What looks likely is that over the next number of years increased costs and taxes or climate levies could be introduced on properties which use fossil fuel heating. Just recently it was announced that the Government is planning to announce a move in green levies from electricity to gas bills as part of a plan to accelerate the move away from fossil fuels. And of course we’ve seen very significant increases in gas and oil costs over the last few months.

No matter what way you look at it, it makes sense to make small changes now, but also consider what bigger changes you could invest in to make your home more sustainable and energy-efficient in the future.


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