Green mortgages are becoming more mainstream than ever, and even buy-to-let landlords can have their pick of products for eco-friendly homes.
Offering an energy-efficient property with top green credentials is becoming not just an added bonus but a necessity for many in the buy-to-let industry.
Energy performance certificates (EPCs) may once have been something prospective tenants – and property investors – merely glanced at, but they are now a crucial part of the buying and renting process. This has been accelerated by government targets to boost EPC ratings.
To add a further incentive to investors and landlords looking at energy-efficient properties, growing numbers of lenders have begun offering ‘green mortgages’. These products offer favourable rates or terms to borrowers with top EPC ratings.
Shawbrook Bank joins the fold
This week, major landlord lender Shawbrook Bank has announced an energy efficiency discount for new buy-to-let customers. It offers a reduction or partial discount of up to 60bps when the property scores an EPC rating of A, B or C.
The lender’s green mortgages are available to landlords who purchase highly rated properties and those who improve an existing property’s EPC rating.
It also offers bridging loans for those buying a property rated D or lower, to be used on improving the property before converting to a buy-to-let mortgage. If they manage to bring the property to an EPC rating of C or higher, they can then benefit from the energy efficiency discount.
Emma Cox, managing director of real estate at Shawbrook, says: “At Shawbrook, we are committed to helping landlords become more energy efficient and actively contributing to a greener future.
“This product enhancement not only incentivises landlords to improve the energy efficiency rating of their property, but it also actively rewards customers when a property already has a high energy efficiency rating.
“By showing proactivity now, landlords will be in a strong position for the future and one step ahead of the upcoming changes to EPC regulation, which have been proposed for 2025 for new tenancies and 2028 for outstanding tenancies.”
Green mortgages incentivise landlords
The government has proposed increasing EPC requirements on rental properties from 2025, which would mean rental homes with new tenancies would need to achieve a rating of C or higher. This would extend to all tenancies by 2028.
Shawbrook’s new green mortgages aim to add an extra push for landlords to become more energy efficient. The current median EPC rating across residential properties in England and Wales is a D, so many would need to improve if minimum requirements are increased.
In recent research by Shawbrook, it was revealed that around a quarter (23%) of landlords believe their properties are rated a D or lower. They believe they could lose up to £9,500 per year in missed rental payments if they cannot improve their rental homes.
Options are growing
A report by Mortgages for Business earlier this year found that the number of green mortgages available for buy-to-let landlords is on the rise, as the industry continues to place growing emphasis on environmental credentials.
According to the study, green buy-to-let mortgage products now make up 15% of the whole market, with 353 products available as of March this year. In the limited company space, they make up 19% of total available deals, with 244 products.
Gavin Richardson, managing director of buy-to-let broker Mortgages for Business, said: “It demonstrates not only the recovery in the BTL sector but also the willingness of lenders to innovate.
“While there are more green products for individual owner, the most marked increase was in limited company lending, where the number of products has risen by more than fivefold since August last year.”