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BTL2023: Sustainability will become more embedded in lending decisions – Carswell

  • 21/04/2023
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BTL2023: Sustainability will become more embedded in lending decisions – Carswell
Sustainability will soon become a more integral part of lending decisions and impact the entire mortgage process.

Speaking at The Buy To Let Forum in Bolton, Ian Carswell (pictured) regional manager for the North of England at BM Solutions, said net zero targets, upcoming EPC legislation and the increasing focus on sustainability would have “all sorts of implications” not only on the buy-to-let market but the “end-to-end mortgage journey”.

“You’ve probably already seen some changes coming in from ourselves [BM Solutions] and other lenders, such as product and criteria changes and that’s likely to happen more and more in future,” he noted.

Carswell added that there may also be changes in sourcing, technology and possibly a knock-on effect on house prices and rental yields.

“EPCs is probably the start of it. In the future, probably in the near future, you’re going to see more property-related data being used in that lending decision. Don’t be surprised if flood risk, property quality, climate data, all those things are going to start coming into the lender decision within a relatively short time.

“At the moment we lend to a customer and the property security. In the future, we’re lending to a person and we’re lending to a property and we’re bringing them together,” he explained.


Lack of EPC legislation deadline ‘frustrating’

Carswell continued that it was “really frustrating” not to have a concrete deadline for EPC legislation, with proposals suggesting that new tenancies should have an EPC rating of C or higher by 2025 and all tenancies should reach this goal by 2028.

The legislation is currently on its second reading in the House of Commons with rumours circulating that the deadline will be moved, although this has not been confirmed by the Department for Levelling Up.

“We haven’t got a deadline and that is a blocker to us because it’s stopping us…funding the support that we want to give to you and your landlord clients. It’s also ultimately a blocker for landlords taking action because until we know a date, everybody is sitting on their hands at the minute.

“But once these regulations are confirmed, you’ll definitely see a lot more happening in this part of the market,” he noted.

Carswell said brokers were likely having more conversations with landlord clients around EPCs, minimum energy efficiency and this was forming a “bigger part of the conversation”.

“They’re probably going to be even more prominent in conversations that you have going forward,” he added.

Carswell said brokers did not have to be experts in but they would need to have a “general awareness” of legislation and the impact it could have on landlords, and be able to “signpost to trusted information”.

“Given the current landscape and direction of travel, a landlord client has never needed an intermediary more than they do today. Buy-to-let is a really complex market and likely to become more so. You [brokers] have a key role in spreading awareness and facilitating landlords to start acting on some of these changes,” he noted.


Landlords have ‘mix of opinions’ on acting now on EPC legislation

Heather Cara, senior manager at BM Solutions, said there was a “mix of opinions” amongst landlords about whether to act now to improve properties or to wait until EPC legislation was finalised.

She explained that if a landlord wanted to act now, they could cash in on available government and energy company grants and benefit from higher tradespeople availability. She noted that landlords with student lets or properties with few voids might have limited time to make such improvements before regulation comes in.

“However, if they wait for some certainty, they may benefit from cheaper parts, but with that rush of everyone wanting a tradesperson at once, they may be paying through the nose for labour, potentially with an impact on the quality of the improvements being made as well,” Cara added.

She continued that landlords with lower EPC-rated properties had the choice to sell or improve the property. If they did neither and continued to let the property, they could face fines of tens of thousands of pounds and possibly see a “reflection of this in their property value”.

Cara added that there could also be a loss of rental income and landlords could have “limited mortgage and refinance options”.

“If they do improve the property, they could see improved property value and rents as well. They can attract tenants wanting lower bills and warm dry homes. They can reduce their carbon footprint and they may be eligible for preferential financial products,” she noted.

Cara said there were three “no regrets activity, low value” things that brokers could help landlords do now to prepare for changes.

This included getting an up-to-date view of the EPC ratings of their properties, find out what improvements need to be made to meet that minimum standard and how much it would cost as potential exemptions that might apply and considering options on how to finance such improvements.


The Buy To Let Forum is continuing in Cardiff and West Sussex. To find out more information follow this link.

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