Pressure builds on landlords with lower EPC ratings as lender caution increases
Buy-to-let mortgage providers in the UK are starting to reassess their lending practices in response to upcoming energy efficiency standards, according to a new report from property data firm Cotality.
New government regulations will require newly rented homes to meet a minimum energy performance certificate (EPC) rating of band ‘C’ from 2028. From 2030, the same standard will apply to all private rented properties. These policy changes could impact landlords applying for five-year fixed rate mortgages on homes with EPC ratings below band ‘C’. If a new tenancy starts after 2028 within the loan term, lenders may face regulatory exposure.
Based on interviews with credit and risk specialists from buy-to-let lenders, banks and building societies, a Cotality report suggests that some firms are already adjusting lending strategies to reflect energy risk.
Several lenders are exploring ways to modernise risk assessments using more dynamic environmental data sources. These include smart meter data, which provides near real-time insights into actual energy use; half-hourly electricity consumption and pricing data, accessible with consent; and weather and flood data from agencies such as the Environment Agency and the Met Office. Other sources under consideration include satellite and aerial imagery to monitor land movement and surface water; open geospatial datasets from Ordnance Survey and local councils; the government EPC database; and property-level retrofit and improvement records from local authorities or industry programmes.
Despite growing awareness, the report found that many lenders still struggle with limited or inconsistent access to this type of data, hampering their ability to make informed lending decisions. Some have yet to define how the looming energy rules will shape their lending criteria.
Industry figures expressed concern that demand for mortgages on more energy-efficient homes — those rated EPC ‘A’ to ‘C’ — could surge in the next two years. That could leave landlords with lower-rated properties at a disadvantage.
“There is a clear desire in lenders to act to mitigate the impact of climate change, starting with the climate risk sitting on their own loan books,” said Mark Blackwell, chief operating officer at Cotality UK. “There’s an imminent regulatory deadline that requires them to do it, but during our research, we found that without more robust data inputs and better access to model scenarios, many aren’t as far on as they want to be.
“There are ways to address this and our research highlighted that lenders are taking a wide range of approaches. What was common to all though, is that meeting the challenge of net zero is not straightforward, and it will require the co-operation of all parts of the market to achieve it in such a short time.”
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