The buzz around green mortgages is growing all the time and with new EPC rule changes on the horizon, more landlords could qualify for these deals. Paul Brett has the lowdown
You may or may not have heard of green mortgages but basically, they offer an incentive to borrowers to make their properties more energy efficient.
There are only a few lenders offering green mortgages, but more are joining in on a regular basis. They are available to both home buyers and landlords seeking a buy-to-let mortgage or remortgage and offer a discount on the interest rate for an energy efficient home.
Landbay is a specialist buy-to-let lender and we were one of the first to launch a green mortgage range last June. We’ve had a really positive response from landlords and mortgage brokers and green mortgages are set to gain in popularity.
What is an EPC?
The new crop of green buy-to-let mortgages are linked to the rating of a property’s Energy Performance Certificate (EPC) where levels range from A to G.
The A rating means the property is very energy efficient with minimal greenhouse gas emissions, but at the other end of the scale, a G rating is extremely poor on both fronts. It’s a similar energy efficient concept as ratings on white goods like fridges and washing machines.
In order to get an EPC, an inspection is carried out by a qualified energy assessor and the certificate shows the property’s estimated energy use. This includes carbon dioxide emissions and the potential annual costs of heating, lighting and hot water.
The EPC also provides suggestions on how to improve the energy efficiency rating of the property and an estimate of how much this might cost. It also shows the potential annual savings if improvements are made and what the new EPC rating might be.
To find out if your home has an EPC go the government website.
Rental properties and EPCs
Since 2007 all properties sold or rented must have an EPC, so the government now has data for around half the residential properties in the UK.
The majority of houses and flats (58%) have a lower energy efficient rating between D and G, which is not surprising as we have some of the oldest housing in Europe. For example, around one in five homes were built before 1919.
Newer properties, on the other hand, are much more energy efficient and 95% are rated A to C with most in band B.
Since 2018, in order to rent out a property it must have an EPC rating of E but the government is proposing to change this in 2025. If the change goes ahead then all new tenancies must have a rating of C and by 2028 this will apply to all existing tenancies.
This is all linked to climate change and the government’s target for net zero carbon emissions by 2050. Housing is responsible for 16% of carbon dioxide emissions, so whether they are rented or owned, we should all be making an effort to make them more energy efficient. This is where the green mortgage comes in.
If landlords can upgrade their properties to at least a C rating, they will qualify for a green mortgage and receive a discount on the interest rate. Our green range is also available for new build properties.
Upgrading property
Upgrades could include simple solutions such as low energy lightbulbs to more extensive work like new double glazing, cavity wall insulation, floor insulation and solar panels.
The biggest culprit for carbon emissions is gas boilers so if they could be replaced with condensing boilers or heat pumps, that would make a big difference. But do be aware that the government wants to phase out gas boilers eventually.
At Landbay we take this issue seriously and not only do we offer green mortgage we have recently been designated a carbon neutral company.
We have reduced our own carbon emissions and offset the rest through funding renewable energy products around the world.
Paul Brett is managing director, intermediaries at Landbay
Landbay is an intermediary-only buy-to-let mortgage lender. This means our mortgages are only available via mortgage brokers and we would always advise landlords to seek advice from brokers who understand the buy-to-let market.
