Cheaper Buy-To-Let mortgages for properties with good EPC Ratings

The Government, over the last year have been urging the UK to re-build in a more green manner and have been passing legislation around minimum EPC ratings for properties as well as giving grants to homeowners to upgrade their homes to be more energy efficient. Under Government proposals, homes in the private rental sector will need a minimum EPC rating of C for new tenancies by 2025 and all homes in the sector will require this rating by 2028. Mortgage lenders are now also trying to incentivise greener properties and there appears to be some movement towards lenders giving more favourable rates on buy-to-let properties with better EPC ratings. According to Landlord today, 6 out of 10 homes in the rental sector still have an EPC rating of D or lower.

Back in March, Paragon Bank released a range of 80% loan to value, buy-to-let mortgages aimed specifically at properties with EPC ratings of A to C. This new range was specifically tailored to incentivise Landlords to invest in making their properties more energy efficient.

Richard Rowntree, Paragon Bank Managing Director of Mortgages, says: “Landlords have made great strides in adding more energy efficient homes to the PRS – or upgrading properties to C or above standard – over the past decade. However, more needs to be done as the Government moves towards its net zero carbon target by 2050 and landlords have a key role to play in that… If landlords are to improve the energy efficiency of PRS stock, they need the finance to enable them to do so. Making sure there are attractive options to add new stock, whilst recognising the efforts to upgrade existing properties, is an important element of this”

In April Keystone followed suit and brought out a range of buy-to-let mortgages also aimed at properties which are older than 5 years old and have an EPC ratings of A-C. Keystone’s range gives landlords a reduction on 0.15% on the interest rates for their core range of mortgage products. They have called this the green product range and the interest rates start at 3.04% for a two-year fixed rate and 3.19% for a 5 year fixed rate. There is a limit of £1 million on the size of the loan, however.

Also in April, the Mortgage Works, the specialist buy-to-let arm of the Nationwide, also opened up new products the incentivise landlords to improve the energy efficiency of their properties. Called the Green Further Advance, the mortgage must be used to fund a range of home improvements such as window upgrades, addition of solar panels or the addition of electric car charging points. This is for smaller loans of £2,500 to £15,000 which would attract and interest rate of 1.49% – up to 50% less than loan advances for other loans secured against a property value.

The drive to improve energy efficiency of the increasingly aged buy-to-let sector is gaining traction and it is a positive that mortgage lenders are now helping landlords with the required improvements by providing cheaper products to allow the landlords to free up necessary funds for the upgrades.