Can a Low EPC Rating Affect My Mortgage?

Buy to Let Mortgages and impact of EPC rating

As sustainability plays increasing importance in the housing industry, much more discussion regarding EPC ratings affecting mortgages. With the current UK energy crisis and the government’s plan for Net-Zero carbon emissions by 2050, legislation is coming into effect and the MEES (Minimum Energy Efficiency Standards) increases the minimum EPC rating a property can have.

Similar to the colored stickers that come with new appliances The rating ranges between A (the highest efficiency) up to (the lowest efficient). The EPC will reveal the price of heat and power for an area, and CO2 emissions. It also gives information about the energy efficiency rating can be achieved when you make the suggested changes

A EPC rating determines how much energy performance of a home and when you purchase or selling a property the seller is required by law to present a current EPC rating, along with the certificate itself.

Can I buy a property with a low EPC Rating?

If looking for a mortgage for a property which is for yourself to live in the mortage providers will generally not consider the EPC rating for a loan, however when purchasing a new home it is advisable to take a very good look at the EPC rating and all recommendations made within the property’s EPC certificate. Don’t forget a low EPC rating (ie E,F,G) directly affects your energy bills. They will provide recommendations for property improvements which will improve the rating and save you money in the long run with reduced bills. However if you are or intend to let the property as a landlord there are mortgage restrictions you should be aware of.

EPC rating on a buy-to-let mortgage

Landlord renatal with keys energy efficient property

An insufficient EPC rating could have a significant effect on the loan-to value ratio, which is a key component to a buy-to–let mortgage. Insufficient EPC ratings make it more difficult to offer new tenants and can result in lower income. However, there are ways to mitigate this problem.

An alternative way to reduce the impact of a low EPC rating is to increase the property’s insulation. Homes with higher EPC ratings will require less energy to run, which will in turn reduce energy bills. Gas-powered homes will have higher energy bills. This will likely increase the energy crisis. The EPC rating will be an important consideration when you are looking for a buy to let mortgage.

The BEIS has launched a consultation on raising the minimum EPC rating for privately rented properties. The regulations aim to improve energy efficiency and reduce carbon emissions. Insufficient EPC ratings could prevent your buy-to–let mortgage being approved. Currently any rental property must have an EPC rating of E or better in order to be tenanted. Additionally a residential property’s EPC can lapse, an EPC lasts for 10 years but if you don’t intend to let or sell your property then it can lapse without any fines. A tenanted or property listed for rent must always have a current certificate with the EPC rating.

Future Legislation

The effect of your EPC rating on your mortgage could change in the near future. Under current government proposals, by 2035, all homes will have to have an EPC C rating or better. This could make obtaining a new mortgage deal harder and potentially more expensive.

Can a good EPC rating help reduce my mortgage rate?

Housing is responsible for a large part of Britain’s carbon emissions. Many lenders offer ‘green mortgages’. The theory behind this is that the fact that if you’re moving to a more efficient home or making your home more efficient and energy efficient, your mortgage lender will offer you reduced interest rates or cashback on your mortgage or both.

It is important to remember that green mortgages aren’t necessarily less expensive than a traditional mortgage that is offered by a different company. You can get a green mortgage in the event that you are purchasing property that has the EPC rating at B or higher. Also, you can get one if you’re refinancing a home where you have increased to raise the EPC rating up to B or higher. The eligibility requirements may vary and you should check with your mortgage company.

Posted in Home EPC.