Deadlines are drawing closer for minimum EPC ratings
With several deadlines looming surrounding Energy Performance Certificate (EPC) ratings for landlords, many have been left wondering how to plug the gap financially as they race to get their properties “EPC-ready”.
Landlords will be unable to continue letting out properties with an EPC rating of ‘F’ or ‘G’ to new or existing tenants from April 1, 2023; there are also the proposed impending 2025 and 2028 deadlines to increase ratings to a ‘C’. This has led some experts to point toward bridging to get improvements over the line.
“Bridging as a whole has increased over recent years and the new EPC requirements will only accelerate this trend further,” said Emily Hollands (pictured left), head of specialist finance at OSB Group.
Bridging – why choose this option?
Hollands said bridging is ideally placed for funding needed at short notice, with the application-to-completion process quick; she added that this means landlords can get the necessary improvements done at speed, minimising impact on tenants.
“Over recent years, bridging interest rates have reduced, making this a more cost-effective way to fund refurbishments,” Hollands added.
She also believes that landlords need to bear in mind that the change in rating requirements to ‘E’ is just the beginning.
With the proposals for further improvements to ‘C’ in 2025 for new tenancies, and 2028 for existing tenancies, Hollands said landlords need to carefully consider which improvements are made now.
“Landlords should look beyond the upcoming requirements for April - it could be more cost effective to complete most of the works now rather than having to face more upheaval further down the road,” she said.
Hollands added that the most common works that need financing will be insulation, double glazing and the installation of energy efficient boilers, all of which she said can be done quickly if the budget is available.
“This is where bridging can really help, particularly given innovation in the sector in recent years, which has seen lenders introduce refurb buy-to-let products that can automatically be extended from a short-term solution to a longer-term mortgage,” she said.
Roxana Mohammadian-Molina (pictured right), chief strategy officer at Blend Network, said bridging loans are more flexible than other finance options, and added that, in terms of speed, they may also be the only choice which will allow landlords to complete the required improvements in time for the April deadline.
Bridging – moving closer to the mainstream
In the last few years, Hollands said bridging had already started moving closer to the mainstream within the buy-to-let and residential markets, so she believes it is only a matter of time before this also applies to commercial funding.
“Recently, the bridging market as a whole has become more professionalised with key, experienced lenders now providing funding options to commercial landlords too,” she said.
Hollands has also noticed the natural progression of bridging products as a popular way of funding for many clients.
“The bridging industry is viewed very differently now to how it was seen five to 10 years ago,” she added. “Additional restrictions on EPC ratings will certainly help this trend.”
Mohammadian-Molina said bridging is a faster and more flexible source of funding - two key conditions for property investors who need to complete on deals or refinance a scheme.
Do you believe that bridging could be the option of chose for landlords looking to improve their EPC ratings? Let us know in the comments below.
