I’m sure that many of us have made some kind of resolution for 2022, whether we say them aloud or we keep them to ourselves to save any embarrassment about failing less than two weeks into the new year.
This is not a confession, by the way. For lenders, many of these resolutions – or at least plans – for the new year appear to revolve around sustainability, diversity, inclusivity and energy efficiency.
As a very recent example, Landbay has been certified as a carbon neutral business for offsetting its greenhouse gas emissions. The endorsement comes from Carbon Neutral Britain, a carbon offsetting initiative which helps individuals and businesses make an impact on climate change.
A number of specialist lenders have embraced the green mortgage drive over the course of the past year, and activity is set to rise in the coming 12 months. Individual awareness is also growing. At the turn of the year, research from Foundation Home Loans found that 67% of all homeowners or aspiring homeowners said a lower mortgage rate based on their property’s energy performance rating is an appealing element when looking at product features.
It added that 48% of homeowners and prospective homeowners would consider improving the energy efficiency rating of their property in order to access a better mortgage product, if it paid for itself in five years. Meanwhile, 5% said they would make green improvements to their property if it paid for itself in 15 years and 24% said they plan to improve their property’s energy performance regardless.
The allure of incentivised lending for properties with higher Energy Performance Certificate (EPC) ratings is certainly escalating. Alongside growing residential awareness, interest and action is also increasing within the landlord community, especially on the back of upcoming legislative changes.
This has been said many times but – in light of some upcoming findings – it certainly does no harm to reiterate that, from 2025, all newly rented properties will be required to have an EPC rating of C or above. Currently, properties only require an EPC rating of E or above. Existing tenancies will have until 2028 to comply with the new rule changes.
The findings I am referring to emerged in research from Shawbrook Bank, which outlined a significant knowledge gap amongst a higher than expected number of landlords. This found that an estimated 15% of landlords said they have no knowledge of upcoming legislative changes to EPCs. A quarter (25%) of landlords surveyed said they had little to no knowledge of the forthcoming changes to the required EPC rating.
With a large proportion (36%) of landlords with properties built pre-1940, Shawbrook’s analysis showed that a significant number of landlords will be required to make changes. On a regional level, four in 10 landlords said that their properties in London were built prior to 1940, with a similar picture in the South West, Scotland and Wales. Victorian properties are thought to make up 13% of private rental housing stock nationally.
As outlined in the study, the true extent of what this legislation could mean for the buy-to-let market is yet to be properly realised, but what we do know for sure is how important it is for landlords to be fully aware of it.
This means that lenders and intermediaries need to work closer than ever to help educate landlords on the potential impact of these changes on individual properties, the actions they should be taking and the types of finance they can access to support any improvements.
There isn’t a one-size-fits-all answer, which outlines the importance of a good, professional advice process in supporting landlords on these important decisions around energy efficiency now and in the future.
Cat Armstrong is director of Dynamo for Intermediaries Mortgage Club
