New guidance sets out lender views on Green Deal
Published: 22 May 2013 | Author: Bernard Clarke
New guidance for members that we have published in conjunction with the Department of Energy and Climate Change reinforces the messages that, in principle, the Green Deal presents no obstacle to lenders – and should not affect mortgage affordability for customers.
Under the Green Deal, borrowers can take out credit to fund improvement to the energy performance of their homes and repay the loan through instalments added to their electricity bill. Costs and potential savings on energy bills will be set out in the property’s energy performance certificate, and the market will determine how the value of their home may be affected.
The guidance points out that Green Deal customers may consume less energy and their homes may be more comfortable. The Green Deal has been designed so that the cost of improvements should not exceed the estimated savings on energy bills.
The property may have a better rating for energy performance as a result of Green Deal improvements, and may be more attractive to potential buyers. But our guidance says that prospective buyers should weigh up for themselves whether a particular property with a Green Deal attached is right for them – and make sure that they apply the "buyer beware" principle.
Consumers may seek independent financial advice, and use customer-facing advice provided by a range of sources including, for example, the Energy Saving Trust.
The guidance includes a reminder that anyone taking over the energy bill on a property with Green Deal finance is not liable for any payment arrears left by the person formerly responsible for the bill. Green Deal instalments are part of the electricity bill and are treated in the same way as any other energy debt.
That principle also applies to lenders who take possession of the property because of mortgage arrears. Once the property is in their possession, however, they will be liable for Green Deal commitments until it is sold again. The energy supplier will not be able to call on the lender for any arrears on the electricity account accrued by the defaulting customer, but lenders may choose to pay off any outstanding Green Deal plan if they want to.
Lenders do not generally need to give their consent to energy efficiency improvements funded by the Green Deal that do not change the structure of the property. This would include improvements like loft insulation and replacement boilers. The Green Deal code of practice does say, however, that customers considering structural improvements to their properties should be advised by Green Deal providers to check if they need to seek the consent of the lender.
If in doubt, we advise borrowers to speak to their lender if they are thinking about major improvements to their property.