2030 of course seems like a very long time in the future. By then, for instance, we will have had another General Election, plus another US Presidential Election; we will have had a football World Cup and a Euros, plus another Olympics, and so on and so on.
There is clearly a lot of water to go under the bridge between now and then, but that doesn’t make 2030 any less of an important year in our sector, and it is clearly a point in the future that all advisers and their landlord borrowers need to be fully aware of.
Because by then, the government wants all private rental sector (PRS) properties to be at least C level, with the added caveat, that between now and then, the EPC itself could be significantly beefed up, and there could well be a period when what ‘hits’ a C level now, is not deemed enough to hit a C level in the future.
However we can only deal with the here and now, and, as we might already realise, this is not just a measure that is going to impact on a handful of properties, a handful of landlords and a handful of tenants.
According to Rightmove’s and government data – published as part of the former’s third Greener Homes Report – an estimated 2.9 million properties are going to need to be improved in order to reach a minimum of EPC C, and that is going to cost £23.4 billion, which works out at an average of £8,074 per property.
Now, of course, these are generalisations and for many landlords that 2030 deadline is going to still seem like a long time in the future, providing them with ample time in order to be able to make any improvements, and to reach the required level.
However, by leaving it late – potentially right up until 2029 for example – what is the landlord borrower missing out on?
Well, for a start, we know tenants are increasingly looking at the energy-efficiency of a property when they are deciding where to live. This again is not surprising during a period when energy bills have sky-rocketed and where there is no guarantee that the relative calm we are seeing right now, will continue into the future. The energy cap is going up again this month after all.
It means that energy-efficient properties could well trigger something of a demand premium – and perhaps they already are – if tenants know that by securing such a property they can keep their energy cost outlay down. Especially if we go through another period like we saw during 2023, for example.
That could be a missed rental income/yield opportunity, but what about at the cost end? Well, certainly for landlord borrowers, access to competitive mortgage finance is vitally important – again after a period when rates were much higher than the last decade, and where affordability became much, much tighter as a result.
Therefore, access to products which ‘reward’ landlord borrowers for having properties with an EPC A-C would be surely worth their time?
We at Fleet recently relaunched both two and five-year fixed-rates for those either seeking to buy or remortgage properties already at this EPC level, and given they come with a rate discounted off our standard products, then having such a property is going to provide a cost saving.
Multiply that out over the next four to five years, and by not having the higher EPC level on the property, it’s likely the landlord is going to be missing out on a significant mortgage cost saving over that period.
Plus, it’s not as if there isn’t ongoing support available to those who want/need to make the changes necessary within their properties to get that EPC level upgraded. At Fleet we offer a £1,000 cashback incentive for those improving the property during their fixed-rate term, while I suspect we will start to see more grants and green funds opening up which some landlords might be able to access in order to get financial support to make these improvements.
The analysis by Rightmove shows categorically that landlords are aware of the increased requirements from the government and half said they were concerned about future financial penalties if their properties didn’t make the required EPC standard by the deadline.
In that sense, advisers might well be pushing at an open door, with both existing and new landlord borrowers, in terms of highlighting what is potentially at stake, but more importantly right now, the benefits that could be accrued by acting sooner rather than later.
This is an issue that presents advisers with a communication opportunity with clients, and at the same time, may well lead to the provision of advice which could save these borrowers a lot of money over the long-term, while ensuring they don’t need to worry about that deadline getting ever closer, and them not having the ways or means to meet it.
Acting now has to be the best strategy.
Article from Best Advice Online written by Steve Cox chief commercial officer at Fleet Mortgages.
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