In recent years, the environmental issues affecting our planet have taken central stage in the media and many people have become more concerned with their own carbon footprint. There are many ways that individuals may modify their lifestyles in an attempt to help fight climate change and protect our home on Earth, such as switching to green energy suppliers, reducing international air travel, or using public transport and cycling to work.
There have also been incentives provided by the government by way of the Green Homes Grant scheme to help homeowners make their properties more energy efficient, although applications closed on 31 March 2021. This scheme was also available to residential landlords who may benefit from improving the EPC rating for the properties in their buy-to-let portfolios.
Since 2018, landlords have been required to comply with the ‘Minimum Level of Energy Efficiency’ standard which sets a minimum EPC rating of band E for residential rental properties. From April 1 2020, landlords are no longer able to let any properties that fail to meet this minimum standard and may face fines for non-compliance.
There have also been recommendations to government by the Climate Change Committee that all homes in the UK should have an EPC rating of at least C by the year 2028, so there is rising pressure to improve the energy efficiency of housing stock in the UK to help fight climate change.
There is clearly motivation for landlords to make improvements to the energy efficiency of their portfolio and it seems that some buy-to-let mortgage lenders are showing thei support for environmental concerns by offering incentives for properties with abetter energy performance rating.
Green mortgages for landlords
Paragon Bank recently launched a range of green buy-to-let mortgages for properties with an EPC rating from A to C. These products offer lower deposit options of 20 per cent (80per cent LTV) compared with a minimum deposit of 25 per cent (75 per cent LTV) for less energy efficient properties.
Paragon also offers a green further advance product to help landlords make improvements to properties with an EPC rating of D or below. Similarly, TMW is offering a green further advance product for making energy efficiency upgrades.
Other green buy-to-let options include Foundation Home Loans with a ‘Green Reward’ remortgage product for applications where sufficient energy improvements can be demonstrated; and Keystone Property Finance who launched a green buy-to-let mortgage in April, which offers a 15 basis point reduction off their core range for properties that are 5 years or older with an EPC rating of A to C.
As there are mounting efforts to improve the energy efficiency of the UK housing stock, landlords are playing their part either by choice or obligation. There may also be more pressure on lenders to ensure that properties on their mortgage books meet the new EPC requirements, so providing green mortgage incentives for energy efficiency upgrades makes sense for all parties involved.