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Will the lower Energy Price Cap help with mortgage affordability?

Journalist:

ended 24. May 2024

Ofgem has today announced that, from 1 July to 30 September the price for energy a typical household who use electricity and gas and pay by Direct Debit will go down to £1568 per year. This is £122 per year lower than the price cap set from 1 April to 30 June 2024 (£1690). Newspage asked brokers if this will have an impact on affordability and improve things for borrowers. Their views are below.

7 responses from the Newspage community

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Justin MoyVerified
Managing Director at EHF Mortgages
The saving of just over £10 a month on the average bill will do little to reignite the mortgage world. At best, it will mean about an extra £500 of mortgage lending if lenders do decide to pass on that saving within their affordability assessment. It's a small win, unfortunately, and nothing more.
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Michelle LawsonVerified
Director at Lawson Financial
As lenders generally use ONS data, this new cap will be factored into mortgage affordability. But let's face it, such a small drop in a big ocean is likely to have little overall impact. Though it's not a huge result for borrowers, it's a tiny step in the right direction. What the mortgage and property markets need is a cut to the base rate.
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Riz MalikVerified
Independent Financial Adviser at R3 Wealth
Energy price cuts, especially with a potential rate cut on the horizon after this morning's dire retail sales data, will definitely start to bring back the feel good factor. Those with more money in their pockets will start to reconsider their future plans, which could include moving. Every penny counts in the current climate.
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Stephen PerkinsVerified
Managing Director at Yellow Brick Mortgages
The reduction in the energy price cap will have minimal impact on mortgage affordability, as lenders tend to use their own assumed figures based on average bills, usually on historical data. Only a base rate reduction will provide enough impact to leave a mark. Anything else is tinkering.
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Katy EatentonVerified
Mortgage & Protection Specialist at Eatenton Finance
Though these changes to the energy price cap may not have a huge impact on mortgage affordability, they do have the potential to improve household disposable income and slightly boost the feel-good factor among borrowers. Reducing costs, lower inflation and potential rate cuts may be the incentive people need to make the move from rented to owning. More disposable income will also help those saving for deposits.
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Dariusz KarpowiczVerified
Director at Albion Financial Advice
This is a step in the right direction, but we in the UK still pay some of the highest rates for electricity in Europe. While the reduction to £1568 per year for energy costs is helpful, we still need additional measures to make living in the UK more affordable. This decrease will certainly ease some financial pressure on households and improve affordability for borrowers, but broader economic reforms are necessary to sustain this positive momentum.
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Benjamin BlythVerified
Director at Houz Mortgages
In reality, yes. Because people, of course, will spend less on one category of expenditure to allow more budget for another.

In terms of a lenders view, the answer very much relies on what datasets they are working to and when they are updated. So until the next round of ONS figures are issued it’s unlikely to have an impact. And even then, it depends how often lenders track these statistics and implement changes.