Following the King’s Speech and details set out for the next parliament, landlords should expect new renter protections to appear soon. Labour has committed to ending Section 21 ‘no fault’ evictions and it’s also likely that rules around making homes more energy efficient will come alongside.

The last government pushed back proposals that forced landlords to bring properties up to an Energy Performance Certificate (EPC) rating of C or above by 2025 for newly rented properties, but Labour could reignite this. Labour deputy leader and now secretary of state for housing, Angela Rayner, supports stricter regulation of rental stock, while Labour’s manifesto stated it would “ensure homes in the private rented sector meet minimum energy efficiency standards by 2030”. However, what constitutes minimum energy efficiency standards remains uncertain.

Some landlords looking to retrofit an inefficient property, or to cash in on a house that already has good green credentials, have looked at green mortgages. Typically, there are two types of deals. The first offers preferential interest rates for those purchasing or remortgaging an already energy-efficient home, defined as an EPC rating of A or B. Alternatively, a green mortgage might offer cash back to help borrowers retrofit their properties to make them more energy efficient. 

However, while deals are available for buy-to-let investors, the current market offerings don’t always add value for landlords wanting to green up their properties.

According to data from Moneyfacts, in 2022 the average green buy-to-let mortgage’s two-year fixed rate was 4.47 per cent and the five-year was 4.97 per cent. Today the average two-year is 7.62 per cent and the average five-year 7.34 per cent. 

In contrast, the average non-green two-year buy-to-let mortgage is 5.45 per cent while the average five-year is 5.51 per cent.

Huy Le, an associate at Knight Frank Finance, said: “Current products are not compelling enough to motivate landlords to improve EPC ratings on their properties.” Given the poor rate offerings for green mortgages in recent years, he has not seen any significant increase in demand from the buy-to-let sector, despite the constant risk of new regulations.

Landlords should also consider the type and age of housing stock they are investing in when deciding if a green mortgage is suitable. “For new builds, they provide a cheaper product. For older, Victorian for example, homes which are usually EPC D, the current green products do not provide enough savings to bring the properties to EPC C or above,” Le added.  

The balance between retrofitting costs and property prices can also differ significantly across the country. Before the pandemic, bringing a Victorian property from EPC D to C would cost £60,000 on average. However, could be as much as £75,000 now due to cost inflation.

“If your property is in London or the South East, it may be worthwhile to refurbish and improve the EPC, but outside of these areas, where property prices are significantly lower (but costs remain at a similar price point), it does not make sense to pay for the works with the green products offered,” Le adds. 

Meera Chindooroy, deputy director of campaigns, public affairs & policy at the NRLA, added: “Green mortgages can help incentivise energy-efficient investment – particularly when interest rates remain relatively high compared to recent years, meaning a discounted rate may be attractive for landlords.

“But while Labour has indicated there will be higher green standards in the private rented sector by 2030, there remains a lack of clarity over what these standards will be and what measures landlords must take to meet them.”