Green homes rise on councilors’ agenda as lenders crack down
Green homes are increasingly on the advisors’ agenda as lenders begin to tighten their rules on what types of properties they will and will not lend on.
In an email to advisers on Feb. 16, the Skipton Building Society said it would no longer lend on rental properties with an energy performance certificate rating of E or lower.
“From May 2, 2022, the bank will only lend against UK rental properties with an EPC rating of A to D, and only where D-rated properties have the potential to improve their EPC rating to C,” it said. she said to intermediaries. .
The government’s green homes target requires landlords to achieve an EPC rating of C for their properties by the end of 2025 for all new rentals and by the end of 2028 for all existing rentals. Although the target is cautioned with “where practical, cost-effective and affordable”.
Since setting the target, the government has said it is considering introducing ‘mandatory disclosure requirements’ for lenders to share properties’ EPC ratings on their mortgage books.
Kwasi Kwarteng, secretary of state for the Department for Business, Energy and Industrial Strategy, said in October that “voluntary improvement targets” for lenders’ existing portfolios could also be introduced, which would require lenders to achieve an average C-band of EPC across their entire existing mortgage portfolios by 2030.
Experts have warned that rental investors could become mortgage prisoners if they fail to ensure their property portfolios are environmentally friendly.
In October, FTAdviser asked six mortgage brokers if they included home energy performance in their advice conversations. All six said they don’t prioritize EPC ratings when discussing with customers.
One said it doesn’t concern them as they don’t believe the industry will end up in a situation where lenders turn down inferior EPC properties.
“It shouldn’t be a surprise”
Today, some advisors are keen to emphasize EPC ratings as a “standard part of the conversation” – at least for buy-to-let clients.
Asked if EPC ratings form a significant part of his mortgage discussions with clients, Chris Costello, director of Liverpool-based CRC Mortgages, replied: “Yes, 100 per cent. For buy-to-lets it is now standard as part of the conversation, [and] the one I’ve had for a while now.
For residential mortgages, Costello said the conversation isn’t as frequent. “Only usually if a ‘green mortgage’ deal sources well, which is very often the case now.”
A number of lenders have launched ranges of green mortgages that offer slightly better rates for residential properties with an EPC rating of AC.
Imran Hussain, director of Nottingham-based Harmony Financial Services, said advisers “should not be surprised” that lenders are implementing changes to ensure the risk they are taking also matches regulatory changes In progress.