Advisers should be talking to their landlord clients now about EPC targets

Originally published by Financial Reporter

Steve Cox, chief commercial officer at Fleet Mortgages, discusses the government’s 2030 deadline for all rental properties to meet minimum EPC standards and why prioritising this in the short-term is going to be far better than waiting until the last minute.

In a move which will have surprised no-one within the private rental sector and buy-to-let markets, the new Labour Government wasted no time in u-turning on the u-turn when it came to upping the minimum EPC standards that all rental properties will have to meet in the future.

Rishi Sunak’s decision to row back on the previous measures for all rental properties to meet EPC level C or above seemed like an odd one at the time, and there was already widespread belief that, if Labour did win the General Election, it would be reintroduced pretty quickly.

And that was exactly how it has come to pass, although with the different timescale put on this requirement – now landlords will have until 2030 to move properties into that A-C zone, although given what the mortgage market is able to offer, I would suggest that prioritising this in the short-term is going to be far better than waiting until the last minute.

There are a number of reasons behind this. First of all, as we know, a large number of properties in the UK are not currently at A-C and it may well be they will require a fair amount of work in order to get them to that level. This could take time, and will take money and resource, and therefore starting that journey now will give landlords the best chance of meeting the requirement in the timescale.

Again, if you leave it to the last minute, then don’t be surprised if the ability to hit A-C doesn’t happen before the deadline, especially if you consider that all those who are in the same boat are going to require a new EPC before the deadline to show they are at the required level.

And, there is a also a consideration here in terms of the EPC itself. There have been numerous calls to ‘beef it up’ and, we shouldn’t also rule out the potential that what is required to be A-C now might not be the case in the future. The standards might be raised over the next five years and therefore again, getting the work started and completed in the shortest timescale is likely to be advantageous.

There are also clear benefits from a mortgage point of view. We’ve recently just relaunched our specific EPC A-C mortgage products, which give a discount on rate for those either buying or remortgaging properties which already meet that requirement.

There is a clear monthly mortgage cost saving to be had here because we are not the only lender to offer these better rates for A-C properties, and obviously those who are not currently at these levels are not going to be able to secure these products.

Secondly, some landlords might well be thinking about the costs of completing the work required to get up to A-C. The good news is that if you review the current EPC of the property you own, or you are looking to buy, at the Government’s ‘Find an energy certificate’ page – https://www.gov.uk/find-energy-certificate – you will find not only that detail, but also information on what you might be able to do to up the level.

For example, when it comes to moving from D-C or above, it may actually not take much activity or indeed much money to be able to secure the higher rating. Conversely, the lower the EPC, the bigger the necessary readjustments might be.

However, there is also good news in that regards as well. At Fleet we offer a £1,000 cashback incentive for landlord borrowers who can improve their EPC to the required A-C level within the fixed-term of their current mortgage, meaning they can offset some, or indeed all, of the cost they incur in improving the EPC standard.

Again, we are not the only buy-to-let lender in the market to offer this, and we have certainly seen a growing number of landlord borrowers taking advantage. We’ve seen new boilers put in, double-glazing and a range of other energy-efficiency measures which, with a new EPC, get the property to the A-C rating, therefore allowing the owner to claim the £1,000.

Overall, it seems pretty obvious that we’re unlikely to see any sort of u-turn on this Government measure in the future, and therefore all landlords who have properties below A-C need to start thinking seriously about how they improve their properties, and how they might fund the works required, particularly if it is going to be substantial.

Advisers should be talking to their landlord clients now about the incentives available, and a timetable about how they are going to get to the A-C point.

Again, this whole issue presents advisers with an opportunity to communicate with landlord clients, to remind them of the services offered, and to lead them through to a point of meeting these responsibilities, so they can secure a more energy-efficient property and the can access the mortgage incentives available.