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Energy efficient BTL

Journalist: Emma Lunn, Freelance

ended 18. October 2022

I’m writing a feature for Mortgage Strategy about “green” BTL mortgages. 

The feature will look at how investing in energy efficiency is a double win for landlords. Firstly, more energy efficient properties will be better for tenants struggling with rising energy bills. Secondly, some lenders offer lower BTL mortgage rates for energy efficient properties.

I need mortgage brokers to comment on:

What mortgage products are currently on the market that encourage landlords to invest in improving the energy efficiency of their properties?

Are these mortgages competitive versus the rest of the BTL market?

Do green BTL mortgages offer any other perks/advantages to landlords other than a cheaper interest rate? (i.e. bigger loans, cashback)

Are there any pitfalls to green BTL mortgages?

How should landlords fund energy efficiency measures? (i.e release equity from their portfolio/further advance etc)

2 responses from the Newspage community

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Editor
Craig Fish
Director at Lodestone Mortgages
From 2025, landlords need to ensure that their property has an EPC rating of C or above. To be honest though, I'm not convinced that many landlords are currently aware of this requirement, unless of course they are a 'professional' landlord with say 10 or more properties. The cost to go from D to C on an EPC is estimated to be around £3600 for a one-bedroom flat, and for a small house around £6400, If you consider a large, detached house it could be as much as £12,500. I believe this is another ticking time bomb ahead of us, because these costs could be a barrier, and result in many landlords exiting the market. To be honest, green mortgages are such a new thing that the benefits of having one are virtually zero at present. We currently have one mortgage available at 5.16% fixed for 5 years, which is great compared to the next cheapest 'standard' mortgage priced at 5.64%, but overall, there isn't enough choice to actually make a real comparison, as not all lenders have jumped on the bandwagon yet.
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Editor
Imran Hussain
Director at Harmony Financial Services
Green buy to let mortgages have very little uptake as they typically only fit new build properties. The only incentive to encourage landlords to improve the energy efficiency of their rental properties is the ticking time bomb of possibly having to have their properties at an EPC rating of C and above, which in all honesty, won't be met. With a shortage of new homes being built and many older properties likely unable to ever achieve a C no matter how much money is thrown at them, we may see a much bigger shortage of rental stock. Many landlords will fund energy efficiency measures by increasing rents.