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Energy efficiency mortgage discounts a key tool for landlords

‘Green’ mortgage discounts could be a key tool in helping landlords make the energy efficiency upgrades necessary to achieve an energy performance certificate (EPC) rating of C or above, according to new research from Shawbrook.

Four in ten landlords (41%) would like the lending industry to introduce mortgage discounts for properties with better EPC ratings. Under current government proposals, buy-to-let properties need 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.

However, while several lenders have introduced ‘green’ propositions over the last year, more than a quarter of landlords said they were unaware that they could access ‘green’ mortgage discounts. Indeed, just 18% of landlords are currently making use of them.

Earlier this year, Shawbrook published it’s Confronting the EPC Challenge report, which aimed to assess the scale of the issue facing landlords. With 23% of landlords saying one or more of their properties are rated D or below, and a further quarter unsure of the current rating of their property, there is a concern that many rental properties will be unrentable in just three years.

However, landlords are now starting to recognise and address this issue, with many improving energy efficiency. However, the costs to do so can be steep, depending on the work needed.

Most landlords who have already made energy efficiency improvements have used cash savings (57%), some 30% have put the 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, some landlords would like to see lenders help them with an action plan to improve their rating (33%) or bridging finance to help improve ratings (28%).

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