Purchase and buy-to-let have been the big hitters this year
There has been a rise in demand for new build properties with higher EPC ratings, according to Craig McKinlay (pictured), new business director at Kensington Mortgages.
He explained that purchase and buy-to-let have been the big hitters this year, with buy-to-let the real standout. McKinlay said that, for 2022, buy-to-let is way above where it was the previous year as landlords have been switching properties in order to meet the government’s EPC targets.
As it stands, in order to let out a property you are required to have an EPC rating of at least an E.However, from the beginning of 2025, any newly rented properties will need a rating of at least a C, and any existing tenancies will have until 2028 to achieve the same.
Read more: Landlords well informed of EPC changes
The government has recommended landlords start with low-cost measures such as adding insulation to wall cavities, floors, and lofts. It also suggests installing a smart meter and LED lights throughout the property. In some cases, more work will be required to get a property up to a C rating, therefore landlords may be expected to purchase triple-glazed windows, solar panels, and more energy-efficient boilers.
However, to avoid the costs McKinlay explained that landlords have, in some cases, been selling their lowest rated properties and instead purchasing new builds - which on average have a higher EPC rating than older homes.
“There are rumours that around 20% of new build properties are being purchased by landlords who intend to rent out the homes,” said McKinlay.
Read more: Nationwide: EPC ratings create house price premium
“In turn, these properties are ending up in the hands of first-time buyers as they are the least desirable and therefore the cheapest.”
This is furthering the issue as many first-time buyers do not have the funds to improve the EPC rating of the property - so there is still the same volume of less energy efficient properties, just fewer in the hands of landlords.
In order to assist borrowers in improving the EPC rating of their homes, McKinlay explained that Kensington Mortgages is offering £1,000 cashback on selected green mortgage products, providing the borrower improves the EPC rating of the property.
“The housing carbon footprint needs to be improved across the country, and we feel by offering borrowers a reward for improving the EPC rating of their home, this is more likely to encourage them to do so,” said McKinlay.
McKinlay went on to say that there has been a “war on buy-to-let”, with the government attempting to put off borrowers from compiling large portfolios of properties.
“However, if you do drive landlords from the market, then there will be less rental properties available and, in turn, rents will increase, thus making the problem worse for renters who are trying to save for their own home,” he added.
The buy-to-let market has been squeezed in the past few years by extra government regulations, including new HMO regulations, as well as the upcoming changes to EPC ratings. As a result, it is estimated that more than 500,000 landlords have ditched their rental properties in the past year.
McKinlay questioned whether “people are really becoming eco warriors, or whether they are just aware of the energy bills rise in April.”
From April 01, 2022, the energy price cap on certain deals has risen by 54% a year.
He believes that whatever the case, more is needed to improve the energy efficiency of UK homes and to reduce the amount of carbon emissions that are produced.
