With less than a decade to go until the UK's Energy Performance Certificate (EPC) regulations kick in, buy-to-let landlords are scrambling to upgrade their properties to meet the minimum energy efficiency requirements. According to Paragon Bank's half-year results for the six months to 31 March, lending on more energy-efficient buy-to-let homes is accelerating rapidly – with EPC A-C rated properties accounting for an increasingly large share of new loans.
Paragon's decision to focus on these eco-friendly homes is no surprise, given the impending changes. From 2030, all rental properties will need a minimum EPC rating of C, and landlords who fail to comply face penalties. This shift towards energy-efficient homes has significant implications for first-time buyers, landlords, and existing homeowners alike – particularly in regions with older housing stocks.
Despite the average UK house price reaching £335,000 (up 10.5% over the past year, according to Rightmove), the cost of bringing a property up to EPC C standard can be substantial – estimated at up to £10,000 for some homes. This could make it even tougher for first-time buyers to enter the market, while existing homeowners may need to factor in costly upgrades to meet the new regulations.
Regional variations are notable, with the North East and North West of England seeing the largest increases in energy-efficient lending – largely due to their aging housing stocks. In contrast, London has seen a smaller increase, possibly because many properties already meet the EPC standards.
The impact of these changes will be far-reaching, affecting not just BTL landlords but also first-time buyers and existing homeowners. As the 2030 deadline draws closer, we can expect to see a continued surge in energy-efficient home upgrades – with potential knock-on effects for house prices, mortgage rates, and the UK property market as a whole.