Prime Minister Rishi Sunak recently made an announcement1 on a number of policies that affect the UK’s path to ‘Net Zero’2 by 2050. Whilst the headline news was primarily the pushback of the ban on the sale of new pure-petrol & diesel cars to 2035, there were some additional announcements that can affect our homes too.
Boilers
Recent years have seen Government policy that traditional fossil fuel boilers were to be phased out, with a requirement for a transition to heat pumps from 2026, meaning that should a gas or oil boiler be due for replacement, then an alternative would need to be sourced.
The 2026 deadline has now been pushed back to 2035 as part of the Government’s latest announcement, allowing additional time for UK homeowners to install gas or oil boilers into their homes. The Government also announced an increase in grants available to help homeowners transition to heatpumps, from £5,000 to £7,000.1
The decision has received mixed reactions, certainly those most affected by the change to a heat pump could be those in more rural areas, where it’s reported that some homeowners may face costs of up to £40,000 to replace their existing fossil fuel boilers for example.3
Generally the transition to a newer heating system can bring certain savings for the homeowner, and the change in the deadline to 2035 gives extra time for UK homeowners to future-proof and upgrade their property to a modern gas or oil boiler before they too are phased out.
Recent findings show that modern boilers are up to 92% more energy efficient, compared to between 65%-85% efficiency in older boilers, so an upgrade could possibly save you money on heating bills and help to reduce your own carbon footprint. The installation fees of a new boiler, on average, cost between £1,500 to £2,500, which is cheaper than installing low-carbon heating system alternatives.4
Energy Efficiency Ratings for Rental Property
Particularly of interest to landlords was the Government announcement on Energy Performance Certificates (EPCs) – overruling a previous decision to require landlords to have an EPC rating of A-C in order to rent out their property.
The EPC ratings are similar to what you’d expect to find on a domestic appliance for example, but in this case, apply to rental properties. The Government had set out that a property must have an A-C rating for energy efficiency by the year 2025 if renting out to a new tenant, and that landlords must have upgraded existing properties to A-C rating by 2028 for any properties with existing tenants already in place.1
This entire policy has now been scrapped under the latest Government plans, leading to mixed reactions from across the marketplace. Whilst some have accused the Government of disregarding environmental concerns, others have celebrated the stimulus this may bring to the rental market and potentially the cost of rent not being increased to cover expensive energy efficiency improvements required to meet the EPC criteria.5
The uncertainty generated by the EPC rating scheme has been one factor behind the reduction in the volume of rental properties available in the UK, as landlords struggled to make key investment decisions on their portfolio to future-proof it, and instead may have sought to sell property instead, especially as interest rates have risen extensively in recent times and the UK privately rented residential sector has lost over 400,000 homes since 2016.[5][6]
Ultimately, many landlords may have already begun their planned improvements to bring their rental properties up to the A-C energy standards to meet the criteria, and have already invested significant sums to do so and therefore this announcement comes too late, however they may reap the benefit of reduced energy costs as a result of the greater energy efficiency.
It’s unknown whether a future Government may overturn the recent EPC announcement, however for the time being it can help to make a buy-to-let purchase more appealing and to some extent reduce the uncertainty in this area.
The Financial Conduct Authority does not regulate some forms of Buy to Lets. Your home/property may be repossessed if you do not keep up repayments on your mortgage.
Sources
BBC (2023) Rishi Sunak: Cars, boilers and net zero – key takeaways from PM’s speech. Available at: https://www.bbc.co.uk/news/uk-66871073 (Accessed 22 Sep 2023)
All the information in this article is correct as of the publish date 28th September 2023. The opinions expressed in this publication are those of the authors. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information.
Whilst many people may be struggling to keep up payments on their mortgages in the wake of steep interest rate rises, there are a significant number of homeowners who may be wondering whether it is worthwhile paying more than the minimum statutory repayments each month, with the aim of helping to save money in the long run.
We look at some of the pros and cons of making a mortgage overpayment each month to see whether the average homeowner could be better or worse off by making an additional payment each month.
Here’s a simplified example to show how it could work –
If someone had a £150,000 mortgage, with a term of 20 years at a rate of 5%, they’d be required to pay back a total of £237,584 in total when making the contracted standard repayment each month. However, if they made an extra monthly overpayment of £100 on top of the existing payment, the cost of repaying the mortgage would fall to £223,327 – saving them approximately £14,300 and enabling the homeowner to pay back the mortgage nearly 3 years quicker.
Naturally there are more complexities in real life, and fluctuating rates each time you remortgage, but generally it goes to show that in many cases it may be possible to pay off a mortgage faster and reduce the amount of interest paid by making relatively small extra overpayments each month.
Making a mortgage overpayment
We’re all different, with different circumstances, so it’s wise to seek professional advice and guidance before deciding to arrange a mortgage overpayment. Your existing mortgage lender is likely to have some advice on their website, but we’d also advise that you talk to us too. We’ll be able to look at your precise circumstances and help give an illustration of what you can achieve by making an overpayment that suits your own lifestyle needs.
How much can you overpay?
The amount can be whatever you can manage, whether a small amount, right up to a general maximum of around 10% of the remaining balance each year1. Overpayments above this maximum amount can be liable for early repayment charges from your lender, so it’s wise to consider this before setting a precise amount. We can help you find the optimum amount that you’d like to repay each month by working with you – simply contact us to arrange an appointment accordingly.
When deciding how much to overpay, it’s important to consider the level of disposable income that you need to enjoy your current lifestyle, and especially any forthcoming expenditures – for example, having money set aside for any family holidays, activities, vehicle maintenance bills or household issues, for example.
What are the benefits of overpaying?
Aside from reducing your mortgage debt more quickly, and potentially saving money on the amount of interest owed, there are additional benefits that can be seen from overpaying your mortgage.
If your mortgage rate is higher than your savings rate, you may find that it is more beneficial to pay back the mortgage and reduce the interest owed, compared to the amount of interest that your money may make while it is sitting in a bank account.
If you pay more of your mortgage off sooner, this can sometimes put you in a stronger position for a cheaper mortgage deal when your existing one is due for renewal. This is because you will have more equity in your property, and your loan-to-value (LTV) is decreased, which often opens up more choices when it comes to available rates for mortgages.
What are the drawbacks of overpaying?
If you have other debts which have higher interest rates, such as credit cards or additional loans, then it may be more beneficial to pay these off first. It’s worth considering any other costs you are likely to incur, and factoring these into whether you can afford to make a mortgage overpayment each month.
With interest rates rising, it’s also worthwhile doing your homework to see what your money could earn you if it’s saved in a high-interest account – there are chances that in some cases it may be more beneficial to save your money rather than pay additional amounts on your mortgage.
It’s important to think carefully about the amounts of money that you may wish to utilise on either overpaying or saving before going further, before looking at the various options available to you. It could be worth seeking financial advice for this element before making a decision.
As mortgage advisers, we are able to assist you in the area of what your mortgage circumstances may look like if you were to consider an overpayment, the impact that this could make on your mortgage and assistance in how you go about facilitating this.
Your home may be repossessed if you do not keep up repayments on your mortgage.
All the information in this article is correct as of the publish date 28th September 2023. The opinions expressed in this publication are those of the authors. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information.
If you are thinking of selling your home, we’ve put together a list of some of the top features that buyers are likely to be looking for in an ideal world:
1. Garages for extra storage space
Storage space is always at a premium, so it’s no surprise that potential buyers are looking for garages that offer extra potential for storage. This can be especially true for families with children, who need a place to store sports equipment, bicycles, and other outdoor gear.
2. Open floor plan
Gone are the days of compartmentalised rooms and closed-off spaces. Today’s homebuyers are looking for open floor plans that allow for better flow and communication between rooms. An open floor plan makes it easier to entertain guests, keep an eye on children, and enjoy the natural light that flows throughout the space.
3. Home office
With more people working remotely, having a dedicated home office is more important than ever. Buyers are looking for properties that offer a separate space for a home office, whether it’s a spare room, a converted attic or basement, or a small nook in a larger room. A dedicated home office can make it easier to focus on work and be more productive.
4. Modern kitchen
Homebuyers will appreciate modern kitchens with all the latest amenities, including high-end appliances, plenty of counter space, and storage for pots, pans, and other kitchen tools.
5. Outdoor patios
Outdoor living spaces are more important than ever, and now the weather is getting warmer, homebuyers are keen to find properties that have a private outdoor patio as a place to relax, entertain guests, and enjoy the fresh air and sunshine. A patio can also add value to a property, making it more attractive to potential buyers in the future.
6. Energy efficiency
Homebuyers are increasingly concerned with energy efficiency and sustainability. They’re looking for properties with energy-efficient appliances, windows, and insulation, as well as other sustainable features like solar panels. These features can help reduce energy bills and a property’s carbon footprint.
7. Hardwood flooring
Finally, hardwood flooring is high on the checklist for housebuyers. Hardwood floors are durable, easy to clean, and add warmth and character to a home. They are also versatile and can be matched to a variety of different interior design styles.
From storage space, to energy efficiency, to modern kitchens, all these features can make a property more attractive and valuable to potential buyers.
All the information in this article is correct as of the publish date 26th July 2023. The opinions expressed in this publication are those of the authors. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information.
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