The government intends to improve the energy efficiency of homes to rating of C, however currently only 40% of them meet this standard.
The government aims for lenders to target an average Energy Performance Certificate (EPC) rating of C across their mortgage books by 2030.
To begin with, this would be voluntary, but may become binding if needs be.
Coles said that this means anyone getting a mortgage could be encouraged to borrow extra cash for energy efficiency improvements as part of the deal.
She said: “The additional cost of this borrowing could technically be covered to some extent by lower energy bills.
“The problem is that while some properties can be improved at relatively little cost, other homeowners will find it prohibitively expensive.”
As a result, homeowners might find themselves unable to afford to borrow more, or the cost of changes to older properties might be disproportionately high, so they would not recoup the cost of the improvements through a sale.
Coles said that legislation is likely to include some kind of exception, to enable people to get a mortgage on these homes.
However, she added that it is likely to get much harder to track down a cheap mortgage for an energy inefficient property, making these properties more difficult to sell, which in turn is likely to bring down their value.
Coles also believes that owners may also struggle to remortgage, so could end up paying over the odds each month.
She said: “In fact, when the government consulted on green mortgages, it baked some of this into its assumptions, saying ‘the market will adjust’, so inefficient properties become cheaper, and people can afford to buy them and improve them.
“This may make sense from an economist’s point of view, but if you’re currently living in one of these homes, and you face the prospect of it losing value, the consequences could be devastating.
“If you’re living in an old family home, and you need to trade down to boost your income in retirement, it could have far-reaching consequences for the rest of your life.”
