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It may not come as a surprise that green, more specifically, the focus on green mortgages, is getting much attention now, but why is that?
New build properties are typically more energy efficient than other property types, but this is not the case for other older properties that make up most of the housing market.
Mortgage lenders are coming under increasing pressure from the Government and the Financial Conduct Authority (FCA) to identify their existing loans’ Energy Performance Certificate (EPC) ratings. Regardless of size, FCA-regulated lenders will have a target to ensure all the properties they lend against will have an 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 properties held by the lenders. This has resulted in many lenders launching new build property criteria and incentives.
But does that solve the problem, or is it just enough to keep the reporting looking keep the reporting the right shade of green?
Why should we ALL care about how green our house is?
The sustainability agenda hasn’t been brought in to balance back books or create beautifully green EPC charts; it’s being championed to align with our Government’s targets of reducing greenhouse gas emissions to net zero by 2050. UK housing stock equates to around 40% of the total, which is a significant amount of carbon emissions each year. On average, houses (with an EPC rating undertaken) in England and Wales were rated band D (in the financial year ended 2019). This is lower than the current government target of having as many homes as possible in EPC band C by 2035. Should we shift our focus closer to home rather than just looking at new build properties?
Most lenders launch ‘green’ mortgages with incentives such as cheaper interest rates or cashback deals. These are usually reserved for those with ratings of C or above, so it is worth looking at what improvements can be made before your next re-mortgage.
What about Buy to Let?
When it comes to Buy-to-Let (BTL) properties, prioritising the Energy Performance Certificate (EPC) rating is essential. Starting from 2025, all BTL properties commencing a new tenancy must have a minimum EPC rating of ‘C’. Existing tenancies have until 2028 to comply with this requirement. This implies that a significant portion of BTL properties will need energy efficiency improvements within the next four to seven years. Failing to meet the required standards may make the property unsuitable for letting.
What can I do about it?
It’s worth reviewing your EPC certificate to check its last rating. You can get a copy from the Government’s website here. The more recent certificates contain even more information about the work that needs to be done to improve the rating and the approximate cost.
If it has been some time since the last EPC, then you can arrange a new one here. 
The reality is that most property investors and homeowners reading this will need to take at least some action. Until we have a replacement for the Green Home Grant scheme, limited resources offer financial assistance. However, as an independent mortgage adviser, we can help you release funds needed from your existing property or BTL portfolio.
Capital raising can be secured for property improvements if you have sufficient available equity. Even if you are currently locked into fixes, there may be options with further advances or additional loans which may be secured on your property. We can even check whether it’s worth breaking a current fixed rate to release capital.
For BTL, as many landlords are locked into 5-year fixed rate buy-to-let mortgages, you’ll probably only have one chance before 2025/2028 to refinance at the end of a fixed term.
After 2025 if your properties still do not have a minimum EPC rating of ‘C’, you’re in danger of encountering issues when coming to re-mortgage. Lenders will not offer further lending against a property that cannot legally be let (unless you have necessary exemptions).
There is also speculation that properties below an EPC rating of ‘C’ will not see the same value increases as those in higher brackets. Looking at your options now could help you turn a potential problem into an opportunity by capitalising on possible property valuation increases while others catch up.
Contact us now if you want further assistance or know more about green mortgages and lender offerings.
