The consultation looks set to enforce the deadline of 2025 for properties with new tenancies to have an EPC above C, and 2028 for those with existing tenancies.
The majority of ‘green’ mortgages, both in the owner-occupied and buy-to-let (BTL) space, see lenders focus on incentivising the purchase of properties with higher EPC ratings.
However, landlords will soon be expected to start the work of improving the energy efficiency of their existing portfolios, and there are fewer products available that cater for this at the moment.
On the subject of lenders providing products to help landlords update the EPC ratings of existing stock, Kipling said: “I think that is something that lenders should do, but then it’s asking the lender to police the process, or be in charge of it, in control of it, which is potentially unfair.
“It’s a government initiative, the government has to drive it.”
Some lenders have made positive steps regardless of where the buck should stop; for example, Kensington Intermediaries has introduced a product that provides £1,000 cashback as a reward for improving a property’s EPC rating by 10 points.
However, Kipling added that he is also yet to experience an influx of BTL clients asking for this type of product.
This might change, either as a result of the BEIS consultation or as the deadlines it imposes eventually draw closer and landlords find they need to make substantial changes to the EPC ratings of their properties over a short period of time.
When asked whether this might mean a rise in demand for short-term finance in the run up to 2025 and 2028, Kipling said: “It really depends upon what the situation is. Bridging can be really useful, but at the same time we would never want to put anyone on to bridge unless they absolutely required one.”
He added that, while bridging might help in some situations – such as where a substantial amount of cosmetic work needs done in a short time, or where the work cannot be undertaken with tenants in situ, leading to potential voids – there are still term options which are likely to be less expensive.
All of this complexity reinforces the need for landlords to be well informed and aware of upcoming changes.
However, recent research by Shawbrook Bank found that 25% of landlords had little to no knowledge of the forthcoming regulatory changes.
While it may be the case that lenders bring out more products aimed at helping improve EPC ratings, the fact remains that it is the landlord’s responsibility to keep up with developments and what is expected of them.
This means there is also an important role for brokers to play, Kipling added: “We’re seeing an ever-increasing level of green products come into the sourcing tables, which in itself is a positive.
“It’s a really useful talking point, so that when we’re advising our clients – although we’re not here to dispense investment advice, what we are here to do is explain the differences, the pitfalls and perils around how they fund a deal.
“Something that I always talk to my client about is the difference between a green deal and non-green deal, what that looks like and what that they may be faced with – and talking points to research around the [EPC] changes and how they’re going to be impacted.
“It’s just making sure they are fully armed with all the knowledge that they need to make an informed decision about the investment they’re about to embark on.”
