New research from Shawnbrook shows that green mortgage discounts could be encouraging landlords to make home upgrades. These discounts can help landlords achieve an energy performance certificate (EPC) rating of C or above. 

With spiraling energy costs causing households to seek ways to save, these could prove helpful for tenants. Government proposals also support the shift towards energy efficient homes. These outline that, buy-to-let properties will need to have an EPC rating of C or above to be rented out to new tenants by 2025. This is expected to be extended to all tenancies by 2030.

Landlord challenges

Earlier this year the specialist savings and lending bank published the Confronting the EPC Challenge report. In total, 23% of landlords said one or more of their properties are rated D or below, and a further quarter was unsure of the current rating of their property.

The report also showed that many rental properties will be unrentable in just three years. Since then many landlords have started to make energy efficiency improvements. 

Ways to make improvements

57% have used cash savings to make improvements, 30% have put work on their credit cards, and 24% have taken out a personal loan to fund the work. 

Landlords have also utilised other finance products, including equity release (16%), a second charge mortgage (14%), or a bridging loan (12%).

More than half (59%) of landlords said they would consider a ‘green’ mortgage discount in the future. In addition to discounts, 33% of landlords would like to see lenders help them with an action plan to improve their rating. While 28% wanted help with bridging finance to help improve ratings (28%).

Four in ten landlords (41%) would like mortgage discounts for properties with better EPC ratings to be introduced by the lending industry.

Lenders have introduced ‘green’ propositions over the last year, yet over a quarter of them are unaware. Only 18% of landlords are making use of them.

Shawbrook offers an Energy Efficiency Discount for new buy-to-let mortgage customers of up to 60bps on their arrangement fee for properties with an EPC rating between A to C. For those with new mortgages where the EPC rating improves to at least a C, customers can apply for a partial refund of their arrangement fee, plus the cost of the new certificate (up to £100).

Emma Cox, managing director of real estate at Shawbrook, said: “Whether the government proposals around EPC ratings come into fruition this year or not, landlords will need to ensure they protect their income and ensure their properties are legally ‘lettable’ as this issue isn’t going to simply disappear. In order to ensure a healthier and more sustainable rental property market that works for landlords, tenants, communities and the environment, change is needed now.”

“Importantly, however, landlords are not alone in this. Lenders, including Shawbrook, have been thinking about how to help them improve their properties, with a flurry of new propositions being launched this year.”

“It’s vital that we are not just rewarding those landlords with property’s rated C or above, but that we, as an industry, are supporting those who need to make improvements. Earlier this year, we hosted a roundtable bringing together industry experts, including lenders, brokers, landlords, and surveyors, to discuss how the sector can support landlords. We are continuing to use the findings of this work to help shape future products and services, and plan to roll out further support for landlords soon.”