Landlords: your guide to green mortgages

Landlords and tenants can agree on one thing right now: making a rental property more energy efficient is a must. Renters will have rising fuel bills in mind, while landlords will be preparing for changes to minimum EPC ratings. Encouragement to make eco improvements in the rental sector can now be found in the mortgage market, as we explain.

Encouraging more eco efficient homes

Even mortgage lenders have their part to play in our quest to achieve net zero carbon emissions by 2050. The Government has asked banks and building societies to encourage the purchase of eco-efficient properties by offering buyers advantageous products billed as ‘green mortgages’. 

Green mortgages explained

A green mortgage will usually offer better rates of interest and borrowing terms to people who are buying the most energy efficient properties for sale. The home they are buying could be brand new or an older home that has been vastly improved with energy efficient features but, generally, green mortgages are offered to those buying properties where the EPC rating is A, B or C.

Rewarding the intention to go green

As well as preferential products for buyers of properties where the EPC rating is already high, green mortgages are also available to those who pledge to improve an existing property’s energy efficiency, introduced as a way of raising eco standards in the UK’s existing housing stock. Assistance to do this can come in the form of cash back or a higher loan amount with the extra funds covering improvement works.

Green mortgages aren’t just for owner-occupiers

Green mortgages are applicable to everyone buying a property, whether they are a buy-to-let investor or an owner occupier. In fact, green mortgages make the most sense for landlords, as lettings compliance is increasingly focused on improving sustainable standards. 

With minimum EPC ratings set to increase from the current E to C for all lets by 2028 – and maybe even a B by 2030 – many landlords may soon automatically qualify for a green mortgage if they are working towards a C EPC rating.

Extra benefits for buy-to-let purchasers

As the number of available green mortgages grows, so does the breadth of help they offer. Buying poorly performing properties isn’t off the cards as there are products designed specifically for investors willing to purchase a property where the EPC rating is D or below. 

Lenders are offering bridging loans to landlords who are embarking on eco improvement programmes, with the loan converting to a buy-to-let mortgage once the work is complete. There can be additional discounts for landlords who achieve the highest EPC ratings, prompting them to really make a concerted energy efficient effort.

More choice for investors

A recent report by Mortgages for Business found green mortgages now make up 15% of the buy-to-let home loan market, with over 350 products available. New green mortgages are being introduced all the time, so it’s worth shopping around to find the right product. Talk to us ahead of your next buy-to-let purchase for advice on eco-efficient property investment.