The house price premium for a property with a higher energy rating – A or B – is just 1.7% compared to a D-rated home, new research from Nationwide shows.

At the other end of the scale, houses rated F or G run with a 3.5% discount over a D-rated property, the lender’s report adds.

Nationwide senior economist Andrew Harvey says that these values are likely to change over time, however, “especially if the government takes measures to incentivise greater energy efficiency in future to help ensure the UK meets its climate change obligations.”

He goes on to say that generally, energy efficiency is improving: In 2009, 14% of the UK’s housing stock was rated C or higher, whereas as of 2019 this had increased to 40%. Furthermore, 94% of new build properties are rated C or above.

Regulation means that socially rented houses have the highest energy efficiency ratings, followed by privately rented stock.

“Within the owner occupier sector there are significant differences in energy efficiency between those who own their property outright and those buying with a mortgage,” Harvey says.

He continues: “In part, these differences reflect the different types and ages of dwellings within the two groups. Those with a mortgage are more likely to live in newer properties and flats, whereas those owning outright tend to live in older houses and are also likely to be older themselves and have lived in their property for longer.

“Consequently, those owning outright are less likely to live in the most energy efficient homes. For example, 31% of properties owned outright by owner occupiers are rated A to C compared to 42% of those owned with a mortgage.”

The report also shows that installing all recommended improvements in F- or G-rated homes would cost £25,800 for a saving of £1,780 a year –equalling a 14-year payback period.

“The pace of energy efficiency improvements is relatively slow given the scale of the challenge. For example, insulation installation is well below the 2012 peak , the last year of the Carbon Emissions Reduction Target and Community Energy Savings Programme.

“This suggests a need for further incentives to help decarbonise homes,” Harvey concludes.