Plans to make UK homes more energy efficient through new "eco-loans" could help to push up property prices but reduce the size of mortgages buyers can borrow, property market experts warned today.
The government plans to allow homeowners to borrow money to fund the upfront costs of eco-upgrades, such as the installation of solid wall insulation, heat pumps and solar panels.
Instead of paying for the energy efficient work upfront, homeowners will be able to take out a long-term loan, with repayments made through a pay-as-you-save mechanism. The loans will be designed so the repayments are less than the amount the borrower saves each month on energy bills, producing a monthly surplus.
This means that anyone living in a house that has had energy efficiency work done could make money out of the process even while the loan is being paid off.
In its household energy management strategy, the government acknowledged that although efficient homes were cheaper to run, this had not yet been reflected in house-buyer demand or property prices.
"A price differential between energy efficient and inefficient homes, coupled with the added prospects of lower fuel bills, would offer homeowners greater incentive to invest in energy efficiency measures," it said.
It has asked the Royal Institution of Chartered Surveyors (RICS) to develop recommendations for both government and property professionals "so that the energy performance of a property starts to be better reflected in its market value".