Cheaper green mortgage rates could be available to landlords who upgrade their properties, but many are missing out, a lender has warned.
Paragon Bank said almost six in 10 landlords who have undertaken energy-efficient property upgrades haven’t then recommissioned energy assessments on the properties, which could potentially unlock the cheaper deals.
Some mortgages have preferential pricing for properties with an Energy Performance Certificate (EPC) rating of between A and C, which means the properties are very energy efficient.
Louisa Sedgwick, managing director of mortgages at Paragon Bank, said: “We were one of the first lenders to launch green mortgages, offering lower rates for properties with EPC ratings of A-C, incentivising landlords to purchase homes with better energy efficiency.”
Why EPCs matter
By 2030, the government wants all landlords to have an EPC rating of at least a C on properties they rent out, so many are undertaking significant energy-efficiency improvements such as installing new windows or insulating lofts.
Friend or foe? The role of AI in mortgage administration
Sponsored by Pepper Money
In February, when this plan was announced, fewer than half of rented homes met this standard. Paragon Bank’s research showed a similar percentage of homes are still not receiving a C rating or above.
Six in 10 landlords own a property with an EPC rating of D and a quarter have a property rated E, F or G, the bank said.
Property agent body PropertyMark said many landlords will struggle to afford the new proposed cost cap and that many landlords, whether they have large or small portfolios, will not be able to make the necessary changes to their property to meet the new standards.
Timothy Douglas, head of policy and campaigns at Propertymark, said the targets must be “realistic and achievable”.
Sedgwick said the 2030 target is unrealistic and could “exacerbate the undersupply of homes for tenants”. The lender is calling on the government to abandon its 2030 target and instead adopt a phased implementation between 2030 and 2035.
Greener mortgages
Several lenders, including Barclays and Paragon Bank, offer greener mortgages to those with more energy-efficient homes, but they will have to apply for a new EPC in order to qualify for the preferential pricing.
Sedgwick said the cheaper rates are available on remortgages as well as current mortgages.
“We’d encourage landlords to reassess their properties following any energy-focused upgrades, because they could be eligible to take advantage of lower pricing,” she added.
This article was first published on Mortgage Solutions‘ sister site, YourMoney.com. Read: Landlords could be missing out on green mortgage deals
