Upcoming changes to minimum EPC requirements are already impacting the buy to let mortgage space. Here, we look at the changes lenders are making and how to navigate them.
Until now, the new EPC minimum requirements of C or above for all tenancies by 2030 felt like a far-off challenge, with many landlords opting to wait to make property amends until full details of the requirements and exemptions are published.
However, new reports show that buy to let lenders are already reassessing how they lend against properties with lower energy-efficiency ratings.
Consequently, landlords looking to secure a 5-year fixed rate against a property with an EPC rating below C could be refused a mortgage before the 2030 deadline.
How lenders are changing their assessments
Cotality, a property data insights and workflow company, reveals in a new report that lenders are currently ‘laying the groundwork’ to limit exposure to the ‘net zero risk’ when approving new loans. Therefore, the properties lenders are willing to lend against could change sooner rather than later.
Other lenders are trying to take a more holistic approach, looking to integrate more “dynamic data sources” for buy to let lending. The aim is to modernise how they assess energy performance and property-level environmental risks.
Some potential data sources include:
- Smart meter data to provide more up-to-date insights into energy consumption in a property
- Regular electricity usage and pricing data, which would offer more realistic energy profiles
- 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 the Ordnance Survey and local authorities
- The government energy performance certificate database
- If available, property-level retrofit and building improvement records from local councils or industry schemes.
Lenders on the fence
However, the report shows that not all lenders have worked out how the 2030 deadline will impact their lending appetite in the future. Many lenders have revealed that access to the data above was still too “patchy” to allow them to make decisions.
Mark Blackwell, the COO at Cotality, commented “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.
“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.”
The impact on landlords
Representatives from key buy to let lenders and valuation firms warned at an event this month that the changes listed above could lead to intense competition amongst lenders to only lend against EPC band A-C within just 1 to 2 years.
Many landlords with less-efficient properties, even those with an EPC rating of D, which is the current minimum requirement, could now face a real disadvantage when securing a 5-year fixed rate.
To find a competitive 5-year buy to let deal, the answer is now simple: speak to a mortgage broker.
We can navigate these challenges for you and find a lender happy to lend against a property below the upcoming EPC C standards. With whole-of-market access, we’ll simplify the process and ensure you secure the best rate to suit your property finance needs.
Next Steps
Call us on 0345 345 6788 or submit an enquiry here.
