Lenders are already restricting mortgages on properties that don’t meet 2028 Energy Performance Certificate minimum standards, it’s claimed.
The government is proposing that, from 2028, all new buy-to-let tenancies will require a minimum EPC rating of C – and all rental properties by 2030. Landlords could face fines of up to £30,000 for non-compliance, with upgrade costs potentially running to £6,000 – £15,000 per property.
Yet despite the timeline, financial experts said there is evidence that some lenders are already tightening lending on properties that fall below EPC C today.
Craig Fish, director at Lodestone, told the Newspage agency that brokers and landlords are being left frustrated by the “stealth approach”.
He adds: “Lenders do need to be cautious, a mortgage is a long-term debt and future EPC standards will affect both the value and mortgageability of a property. But taking a stealth approach, quietly restricting lending without clear explanation, is likely to frustrate both brokers and landlords.
“Landlords need time to plan and budget because this is a costly exercise, and pushing too soon could force some out of the market. If that happens, we may see a flood of properties for sale and a softening of house prices in some areas.
“Tenants stand to benefit from warmer, cheaper-to-run homes, but the flipside is that landlords will naturally try to recover upgrade costs through higher rents, adding to the affordability pressures renters already face.”
And Justin Moy, managing director at EHF Mortgages, warns that this could spell the end of some landlords. “We’re seeing a shift by lenders promoting ‘Green’ Buy to Let mortgage products, with a number offering reduced fees, free EPCs and lower rates to encourage landlords to improve the efficiency of their properties.
“However, there are plenty of older properties that will struggle to capture a rating of ‘C’ irrespective of the money spent on improvements, and the Government needs to look at how the EPCs represent those types of properties, and whether the exemption route needs to be more forgiving to avoid a catastrophe of social housing issues in a few years’ time.
“We could have landlords forced to sell, but unable to match with buyers who are also bound by the same regulation.”
Rob Peters, orincipal at Simple Fast Mortgage, believes landlords “deserve clarity and consistency” and adds: “Lenders tightening EPC criteria early was always going to happen, it’s just the market front-running legislation as mortgages are long-term contracts. But landlords deserve clarity and consistency.
“This creeping policy-by-stealth creates confusion and panic selling. The government needs to step in with clear retrofit support and incentives to help landlords future-proof, otherwise, we’ll see regional disparities, rising rents, and a shrinking private rental sector, which ultimately hurts tenants the most.”
But Ben Perks, managing director at Orchard Financial Advisers, says this is actually just responsible lending.
“Three years isn’t that far off, and if you’re purchasing a property it’s only right that the lender ensures you’re able to keep it in the not too distant future, especially if you take a three or five year fixed rate. It does seem OTT, but it is responsible lending and people would be quick to berate the lender if they had trouble refinancing a property in the near future.”
