Spread of Green Mortgages key to improving rental sector EPCs

Green mortgage discounts could be a key tool in helping landlords make the energy efficiency upgrades necessary to achieve an EPC rating of C or above, according to new research from Shawbrook.

Four in 10 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 per cent of landlords are currently making use of them.

Shawbrook says landlords are now 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 per cent), some 30 per cent have put the work on their credit cards, and 24 per cent have taken out a personal loan to fund the work. 

Landlords have also utilised other finance products, including equity release (16 per cent), a second charge mortgage (14 per cent), or a bridging loan (12 per cent).

Over half 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 or bridging finance to help improve ratings.

Emma Cox, managing director of real estate at Shawbrook, says: “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.”