Poorly insulated UK households face energy bills of around £6,600 from October as prices surge.
The average UK household is set to spend around £3,549 a year on energy bills once the new price cap comes into effect on 1 October. This is a rise of more than £1,250 even after the government’s £400 discount is taken into account.
However, according to Nationwide, the least efficient households face a £2,700 rise in bills to £6,600 — £225 per month more.
Around two in every 10 houses in the UK fall under category F/G on the EPC rating, the bottom of the energy efficiency list. These households usually see bills twice as high as the A-C rated properties.
An Energy Performance Certificate (EPC) rates the energy efficiency of buildings on a scale of A (most efficient) to G (least efficient).
Currently, properties rated A-C pay £1,700 per year, whilst those rated F-G typically see bills over twice as high at around £3,900 per year.
Robert Gardner, Nationwide's chief economist, said: “Those in properties rated A-C will see average bills increase by nearly £1,000 a year (or over £80 per month). E-rated properties will see an increase of over £1,700 per year (c. £150 per month), whilst those in the least energy efficient properties (F/G) face a staggering £2,700 rise (£225 per month),”
Regulator Ofgem announced an 80% energy price cap increase, stating the jump in energy bills reflects the continued rise in global wholesale gas prices, which began to surge as the world unlocked from the COVID pandemic and have been driven still higher to record levels by Russia slowly switching off gas supplies to Europe.
Tomer Aboody, director of property lender MT Finance, said homebuyers will be looking for energy-efficient properties.
“With energy prices rocketing, an energy-efficient home will be higher up the pecking order on buyer’s wish lists, especially as lenders will be looking to reward borrowers on being more efficient by offering lower rates,” he said.
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, commented: “You might think a posh period property is your dream home, but in reality, owning one is becoming a financial nightmare.
"The age of a property is the single biggest factor in determining how energy efficient it’s likely to be. Almost all homes built since 2012 in England and Wales have a high energy efficiency rating — compared with 12% of those built before 1900 in England and 8% of those of the same age in Wales.
"The next most important factor is size. Flats and maisonettes are most likely to be in the most efficient bands and detached homes are the least likely to be. It means that big, detached Victorian homes are costing people dear.
"Before the horrendous hikes in the energy price cap, this might have been manageable, but the impact of rising prices is taking a terrible toll. The average energy bill for the least efficient homes is twice the level of the most efficient homes — at £3,900, and the price cap rise will add an incredible £2,700. That’s an impossible bill of £550 a month."
House price growth cooled in August but remained in double digits, with the average property costing £50,000 more than two years ago, Nationwide has said.
Annual house price growth slowed to 10% in August, down from 11% in July, amid early signs of the housing market losing momentum as the cost of living crisis worsens.
However, prices were up 0.8% month-on-month, marking the 13th month in a row that average prices have risen, according to Nationwide’s house price index.
The average property cost £273,751 in July, growing more than £2,000 from the previous month.
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With mortgage rates rapidly rising, consumer confidence at a record low and real household incomes falling because of soaring inflation, many analysts expect the housing market to cool in the immediate future.
Gardner said: “There are signs that the housing market is losing some momentum, with surveyors reporting fewer new buyer inquiries in recent months and the number of mortgage approvals for house purchases falling below pre-pandemic levels.
“However, the slowdown to date has been modest, and combined with a shortage of stock on the market, has meant that price growth has remained firm.
“We expect the market to slow further as pressure on household budgets intensifies in the coming quarters, with inflation set remain in double digits into next year.
Alice Haine, personal finance analyst at Bestinvest, commented: “With interest rates already sitting at 1.75% following six rate rises from the pandemic-by era low of 0.10% in December last year, borrowing is certainly becoming less affordable for buyers at a time when real wages are falling because salary increases cannot keep pace with inflation.
“The Bank of England is likely to raise the base rate again at its next meeting later this month, potentially by a further 0.5%, putting dreams of home ownership further out of reach for some as it strives to stem runaway inflation.