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Preparing landlords for EPC changes will be key to advice process – Cox

by: Steve Cox, chief commercial officer at Fleet Mortgages
  • 16/05/2022
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Preparing landlords for EPC changes will be key to advice process – Cox
The latest house price indices all appear to be saying broadly the same thing – it will come as no surprise to anyone that, with demand exceeding supply by a considerable margin, annual house price inflation is in double-digit territory.

The latest Nationwide index for April shows annual growth rose by 12.1 per cent; the ninth consecutive month for price growth. 

For existing landlords, who are acquisitive and understand the methods by which they can use equity growth to develop their portfolios, this would normally represent an opportunity not to be missed.  

Releasing that equity via a remortgage or further advance allows them to potentially secure their next deposit for their next property. And, of course, there will be a significant number of landlords who do this, who want and need advice, and will be looking to advisers in order to support this activity.  


Reassigning funds 

However, it may not simply be a matter of gearing up to fund further purchases right now, because as we know there are other matters at play which may determine what they do with that capital growth.  

As was mentioned extensively at the recent Buy-to-Let Forums, the need to ensure properties are going to meet the EPC standards of the future may be preying heavily on the minds of many landlords at present.  

Unfortunately, the chance of securing grants to allow them to upgrade their properties’ energy efficiency is zero, and yet should the consultation come into effect – as we all anticipate – then from the end of 2025 they will need to ensure every new tenancy is within a property at EPC level C and above, while this requirement will be a few years later for existing tenancies

If a landlord has properties which don’t currently meet these requirements and their intent is on being active in the private rental sector (PRS) for many years to come, then they will literally have to get their house(s) in order to do so. 


How advisers can help 

In that sense, advisers may well need to have these conversations with landlord clients sooner rather than later. Of course, the last thing you’re going to want to do is throw a potential spanner in the works for a client who has come to you in order to access their equity in order to further their purchasing agenda. 

But, at this very point it’s likely you’ll be talking about EPC levels for any new properties anyway, so why wouldn’t you also be raising the issue in terms of what will be required for the rest of the portfolio. 

As an industry, we don’t always have the best record in terms of planning and preparing for market-shifting changes; we can tend to leave it to the last minute. But, when it comes to energy-efficiency now is definitely as good a time as any, especially given the house price growth, and what is also befalling many people in terms of household costs, specifically those for utilities. 

It’s unlikely to mean you lose out on any potential remortgage or product transfer business, but it just might mean that the landlord uses some (or all) of those funds released for a different purpose than they anticipated.  


Using available tools 

Look at the government’s EPC checker and it gives ideas about what might be required for the property to move up a level or two to secure a higher EPC ‘grade’. For many properties, it might not be much at all, and therefore the ambition to access equity for further purchasing won’t be impinged upon. 

However, for others, it may well need some significant investment and therefore now might well be the right time to work out what is required and how it’s going to be paid for.  

This is a key part of the service you are going to need to offer to landlords – existing or new – and the sooner you have that conversation, the sooner they can prepare for the future, and you can help them secure the funds they need. 

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