Green mortgage discounts could be a key tool in helping landlords make the energy efficiency upgrades necessary to achieve an energy performance certificate (EPC) rating of C or above, according to new research from Shawbrook.
41% of landlords would like to see the lending industry introduce mortgage discounts for properties with better EPC ratings. Under current government proposals, buy-to-let properties will need to have an EPC rating of C or above in order to be rented out to new tenants by 2025. This is expected to be extended to all tenancies by 2030.
However, while a number of lenders have introduced ‘green’ propositions over the last year, more than a quarter of landlords said they were unaware that they could access ‘green’ mortgage discounts. Indeed, just 18% of landlords are currently making use of them.
Earlier this year, Shawbrook published its Confronting the EPC Challenge report, which aimed to assess the scale of the issue facing landlords. With 23% of landlords saying one or more of their properties are rated D or below and a further quarter unsure of the current rating of their property, there is a concern that many rental properties will be unrentable in just three years.
However, landlords are now starting to recognise and address this issue, with many starting to make energy efficiency improvements. However, the costs to do so can be steep depending on the work needed.
Most landlords who have already made energy efficiency improvements have used cash savings (57%), some 30% have put the work on their credit cards, and 24% have taken out a personal loan to fund the work. Landlords have also utilised other finance products, including equity release (16%), a second charge mortgage (14%), or a bridging loan (12%).
59% of landlords said they would consider a ‘green’ mortgage discount in the future. In addition to discounts, some landlords would like to see lenders to help them with an action plan to improve their rating (33%) or bridging finance to help improve ratings (28%).
Shawbrook recently announced its Energy Efficiency Discount for new buy-to-let mortgage customers of up to 60bps on their arrangement fee for properties with an EPC rating of A, B or C. For new mortgages on properties where the EPC rating improves to at least a C during the term with Shawbrook, customers can apply for a partial refund of their arrangement fee, plus the cost of the new certificate (up to £100).
In addition, Shawbrook has plans to roll out further support for landlords needing to make improvements to their properties in the coming months as part of its commitment to support them on their journey to becoming more energy efficient.
Emma Cox, managing director of real estate at Shawbrook, said: “Whether the government proposals around EPC ratings come into fruition this year or not, landlords will need to ensure they protect their income and ensure their properties are legally ‘lettable’ as this issue isn’t going to simply disappear. In order to ensure a healthier and more sustainable rental property market that works for landlords, tenants, communities and the environment, change is needed now.
“Importantly, however, landlords are not alone in this. Lenders, including Shawbrook, have been thinking about how to help them improve their properties, with a flurry of new propositions being launched this year.
“It’s vital that we are not just rewarding those landlords with property’s rated C or above, but that we, as an industry, are supporting those who need to make improvements. Earlier this year, we hosted a roundtable bringing together industry experts, including lenders, brokers, landlords, and surveyors, to discuss how the sector can support landlords. We are continuing to use the findings of this work to help shape future products and services, and plan to roll out further support for landlords soon.”
