Lenders are currently grabbing “the lowest hanging fruit” in terms of lending on homes that already have EPCs rated C or above, but the main focus going forward should be around getting existing stock up to par and how flexible financing can be provided to do that, according to OnLadder co-founder Cameron Orcutt. 

Orcutt’s comments come after a mortgage climate action group was launched earlier this year, initially through a partnership between Legal & General, Sesame Bankhall Group and SimplyBiz Mortgages.

The group’s aim is to interpret new climate change legislation and engage with industry stakeholders to provide guidance and practical help for advisers.

Since the launch, Home Loan Partnership, Mortgage Intelligence, Primis, Openwork and Paradigm have also joined.

This followed the UK government’s announcement that it wants homes in England and Wales to reach a minimum EPC level of C by 2025 and the private rental sector for 2035.

Last week, Leeds Building Society head of sustainable products Paul Braithwaite called into question whether the delay in passing the legislation against the background of record temperatures, energy price rises and political uncertainty is resulting in procrastination and therefore, a missed opportunity to get the UK to net zero quicker. 

This has raised the question as to whether the move will push landlords to sell stock, which could result in pushing the problem into the residential space 10 years down the line. 

Speaking on this week’s Lenders Live on LinkedIn hosted by Knowledge Bank, Orcutt says: “Ultimately, this is not going to be done by the government and it’s not going to be done by households, they are going to need a way in which to spread the cost out over a long period of time.”

“However, this is something that lenders need to focus on because long term it is going to be on residential homes and if they can’t get a mortgage that hurts a lender’s loan book and the value of it. I don’t think anybody wants to see that,” he adds.

Speaking from a lender’s perspective, Quantum Mortgages founder and managing director Jason Neale says the biggest challenge is getting existing stock from an EPC rating of D or E, up to a C. 

Neale explains: “As lenders, we have made a pretty poor effort when it comes to green mortgages because they don’t actually do anything practical to help the landlord upgrade the property.”

“Lenders need to be doing more to support this,” he adds.

Also weighing in, Connect for Intermediaries owner Liz Syms comments: “The first thing we have to remember is that it’s not legislation as yet, and for that reason there’s still a lot of grey areas in terms of knowledge and understanding of what actually to do to a property to bring up the EPC standard to the required levels.”

“As advisors, we have got to be quite careful of not rushing to our customers and say get this done, or go get that done. I have already started hearing stories of people that have spent thousands and it didn’t move the rating up by more than a couple of bits and not into the next level.”

“There’s definitely a really big knowledge piece that is missing. There’s going to be some help that our customers are going to need to properly understand their individual properties and what is going to be viable to make the EPC move up.”

“Property investors are targeting properties that are already A to C. We work a lot with very serious professional investors, people that do refurbishment and people that understand property and I think there is an investment opportunity for also for landlords. There’s an article suggesting that there’s a 16% uplift in value if somebody takes a property from a rating F to C, which is an attractive proposition for certain types of landlords.”

“It will be really good to see more refurbishment-style products coming into the marketplace to support that. It would also help rather than leaving it all to the residential clients in 2035.”