Few issues appear as pressing at this moment than the increase in the cost of living, and specifically, the increase in energy costs and how UK households cope with them.
In her very first days as Prime Minister, Liz Truss, made the decision to maintain the energy price cap at current levels, however it seems obvious that a more long-term energy strategy is going to be required, and the UK’s housing market is clearly at the centre of this both now and in the future.
As if to solidify how this issue has grown in importance, I was interested to read that, according to Legal & General Mortgage Club, there has been a 34% increase in searches that consider a property’s energy performance certificate (EPC). And, one might expect this trend to continue, particularly through the winter, when I suspect, the energy-efficiency levels of a property are going to be under far greater consideration than ever before.
Certainly, for landlords, the EPC level of a property might be said to be an even more pressing concern. As we all know, to let a property out it currently needs to be at an EPC level of E and above, but the likelihood is – unless the new government changes tack – that this will be upped to level C and above for new tenancies in 2025 and for existing tenancies from 2028.
It’s why, in the recent Q2 iteration of the BDRC landlord panel survey, we saw that over two-thirds of landlords planning to purchase property over the next year were looking at properties rated EPC level A-C, and why over half of landlords who had bought in the three months’ prior had also opted to purchase property with this EPC level.
Slowly but surely, I think we can all see the approach to this part of a property’s DNA changing, and certainly within the buy-to-let space, lenders like ourselves have needed to offer products which cater for this, and that work alongside the changing requirements and landlords’ need to have properties that fulfil these rules.
To that end, we recently extended, our Green buy-to-let mortgage range specifically for those landlord borrowers either seeking to buy or remortgage a property within the higher EPC level, with two-year discount products up to 75% LTV now available.
It should be quite obvious to all that the move to ‘greener’ mortgage products that satisfy this type of demand, can no longer be deemed a flash in the pan or greenwashing, but an absolutely vital part of the overall mortgage landscape. Certainly, the issue might be more pressing for landlords, but as mentioned above, owner-occupiers are beginning to place energy-efficiency of the home far higher up the list of ‘must haves’ when they come to review what fundamentals they want in their properties and what they are willing to pay for them.
I’m not sure if we are at this point yet, but we can’t be too far away from a point where higher EPC-rated properties will be priced at a premium, or owners will find they are able to sell their homes in a quicker time if they have a higher rating. These are all considerations to be made, especially – if as seems highly likely – governments of today and the future prioritise energy efficiency within the home as a means of meeting their carbon emission targets.
Overall, the UK housing market has a major role to play here, and both landlords and owner-occupiers – for a whole variety of reasons – are going to be much more aware of energy efficiency, EPC levels, and the impact this has on the environment, costs and incomes. It’s important that we as lenders continue to offer quality products and choice in this space, and that advisers are fully aware of the options that can make the lives of their clients that much easier.
Mark Whitear is director of commercial development at Foundation Home Loans