Buy-to-let lenders are “futureproofing” their mortgage portfolios by looking again at how they lend against properties with lower energy efficiency ratings, according to Cotality. 

Energy department legislation is set to enforce a minimum energy performance certificate rating of band C on all properties starting a new private rental tenancy agreement from 2028 and for all private rented homes from 2030, the study from the property data firm points out.

It adds: “If the deadlines go ahead as slated, it means landlords now seeking a five-year fixed rate BTL mortgage secured against a property with an energy performance certificate rating below band C could be refused a mortgage before these net zero deadlines hit.

“This is because a new tenancy agreement could commence after the 2028 deadline but within the five-year mortgage deal term – potentially leaving lenders exposed to regulatory risk.”

Some lenders are already considering how these net zero deadlines affect what properties they lend against, the firm says in its report, Temperature Check 2025: How prepared are buy-to-let lenders for future property risk?

The report gathering views from credit and risk executives across a range of specialist BTL lenders, building societies and banks.

It says that, “some BTL lenders are currently laying the groundwork to ensure they limit their own exposure to ‘net zero risk’ when approving new loans.

“Others plan to integrate with more ‘dynamic data sources’ for new BTL lending and refinance to help modernise how they assess property-level environmental risks and energy performance.”

It points out that these sources include:

• Smart meter data

• Half-hourly electricity usage and pricing data, available to suppliers and aggregators with consent

• Weather and flooding data from the Environment Agency and the Met Office

• Satellite and aerial imagery for monitoring land movement and surface water

• Open geospatial datasets from Ordnance Survey and local authorities

• The government’s energy performance certificate database

• Property-level retrofit and building improvement records, where available, from local councils, or industry schemes

But the paper points out that “some lenders have not yet fully worked out how net zero deadlines will affect their future lending appetites”.

It adds that “a significant proportion of BTL lenders admitted their access to this type of data was still too ‘patchy’ to allow them to make well-informed enough decisions.”

The data firm points out that lender and valuation firms it has talked to “warn that this could lead to intense competition to lend against energy performance certificate band A, B and C private rented homes within one or two years”.

It adds: “This could leave private landlords with less efficient properties at a disadvantage when trying to secure BTL mortgage finance before the government’s net zero deadlines come into force.”

Cotality UK chief operating officer Mark Blackwell says: “There is a clear desire in lenders to act to mitigate the impact of climate change, starting with the climate risk sitting on their own loan books.

 “There’s an imminent regulatory deadline that requires them to do it, but during our research we found that without more robust data inputs and better access to model scenarios, many aren’t as far on as they want to be. 

Blackwell adds: “There are ways to address this, and our research highlighted that lenders are taking a wide range of approaches. 

“What was common to all though, is that meeting the challenge of net zero is not straightforward, and it will require the co-operation of all parts of the market to achieve it in such a short time.”

Around half a million rented homes could be lifted out of fuel poverty over the next five years, the Department for Energy Security and Net Zero said in February. 

The energy department reiterated its plan, set out last August, that all private landlord properties must meet an energy performance certificate rating of C by 2030 – up from the current minimum E rating.  

The department estimates that 48% of private rented homes in England already meet the C standard, adding that upgrades will cost landlords between £6,100 and £6,800 on average by 2030.

UK landlords collectively face a £21.5bn bill to upgrade their properties to new green government standards, according to a report from rental deposit firm Zero Deposit, published last September.