Looking at the EPC rating should be a top priority for your clients who own BTL property. As of 2025, all buy-to-let property starting a new tenancy will require an EPC rating of ‘C’.
Existing tenancies have until 2028. This means that a significant majority of BTL property will need some remedial energy efficiency work within the next few years or risk being unable to let out their property.
Shawbrook’s ‘Changing Face of Buy to Let’ report found that close to two-thirds of landlords (62%) have undertaken a refurbishment to one of their rental properties in the last 12 months, with 18% renovating more than one rental property.
Of all the landlords that had undertaken a refurbishment, 22% had replaced the boiler and heating system in their property, a further 23% had replaced the windows, and 18% had installed new white goods. All these actions could impact a property’s EPC rating and help landlords move closer to achieving a rating of C or above.
Mortgage lenders are also coming under increasing pressure from the government and the Financial Conduct Authority (FCA) to identify their existing loans’ EPC ratings.
Regardless of size, FCA-regulated lenders will have a target to ensure all the properties they lend against will have the average EPC rating of ‘C’ by 2030.
Adding new build property to the types of property they lend on could help solve this challenge. This is because a new build property with an A/B EPC rating is a quick fix to levelling out the lower ratings of existing property held by the lenders. The result is that many lenders have been launching new build property criteria and incentives.
Most lenders are also launching ‘green’ mortgages with incentives such as cheaper interest rates or cashback deals, usually reserved for those with ratings of C or above.
It is worth helping your clients look at what improvements can be done before you do their next remortgage. Be very wary about locking your BTL clients into a fixed rate that extends beyond 2025 without checking the current EPC rating.
Once they are locked into a fixed rate, what are the options if they need to raise capital to do remedial work? Being locked in at that time means it may prove more problematic to raise funds as a remortgage could be costly, and if there are no other alternatives, you may face a complaint.
How to help your landlords
You can help them review their current EPC certificate in the first instance by checking its last rating. You can get a copy from the government’s website.
The more recent certificates contain even more information about the works that need to be done to improve the rating and the approximate cost. If it has been some time since the last EPC, then you can help them to arrange a new one.
There is also speculation that properties below an EPC rating of ‘C’ will not see the same value increases as those in higher brackets.
Helping your clients look at their options now could turn a potential problem into an opportunity by capitalising on a possible increase in the property valuation.
For clients already locked into long term fixes, you may need to brush up on your second charge/secured loan knowledge. Properties with low ratings may be harder and more expensive to improve, and your client may need to borrow to cover the costs.
Few lenders in the specialist side of the BTL market offer further advances, so a second charge loan solution may be an option.
However, the first charge lender does not have to give consent for a second charge loan. Again, in the specialist BTL market, many first charge lenders do not give consent for second charge loans. It will be interesting to see how this develops.
It is hard to imagine that there will still be lenders that will neither offer a further advance or allow a second charge when the borrowing is for work specifically to improve the properties EPC, increasing the property value and helping the first charge lender to reach its own environmental targets.
While many lenders are focusing on offering green mortgages, for some, considering their further advance or second charge policy should also be a priority for innovation.
