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Buy-to-let mortgages on rise – but landlords would rather quit than meet new eco rules

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There are more buy-to-let mortgage deals available now than at any point during the pandemic, including ‘green’ deals – but some landlords are considering leaving the market due to incoming energy efficiency rules.

The number of deals on the market has reached more than 2,700, according to Moneyfacts, the highest since March 2020 and an increase of nearly 1,000 annually.

It is also 365 more than were available in July 2019, ahead of the pandemic. 

Waste of energy? Availability of buy-to-let mortgages is improving, but some landlords are reticent to take advantage because of upcoming regulations around EPC ratings

Waste of energy? Availability of buy-to-let mortgages is improving, but some landlords are reticent to take advantage because of upcoming regulations around EPC ratings

As well as launching more products in general, lenders are increasingly offering mortgages that reward landlords with energy-efficient properties, as the Government moves to make less energy efficient homes effectively difficult to rent out within the next 15 years. 

But despite these incentives, some landlords have told This is Money they would rather quit the market than spend money bringing their properties up to the required standard.  

The Mortgage Works – the landlord arm of Nationwide and one of the UK’s biggest buy-to-let lenders – has re-introduced loans with 20 per cent deposits after withdrawing them at the beginning of the pandemic. 

They are available for purchase and remortgage with two-year fixed rates starting from 2.49 per cent with a 2 per cent fee and five-year fixed rates starting from 2.99 per cent with a 2 per cent fee.

However, the one key difference from the previously available products is that they are now only available on properties that have an EPC energy efficiency rating of C or above.

Just 2 per cent of homes currently make the A and B grades, while around 85 per cent are either C or D, according to the latest English Housing Survey. Around 13 per cent, more than 14 million, are rated E, F or G. 

Improving homes by adding better insulation or replacing gas boilers can cost tens of thousands of pounds – and some landlords say it is not worth it.  

For certain older homes, it might not even be possible to get up to a EPC C rating. 

Energy efficiency rules ‘by far the biggest threat’ to landlords 

Despite the mortgage incentives on offer, some landlords told This is Money that they were not planning to bring their properties up to scratch and that instead they wanted to quit buy-to-let. 

Most wanted to be anonymous because they did not want their tenants to find out that they wanted to sell before they had finalised their plans. 

One portfolio landlords told us: ‘Of all the punitive recent legislation and anti-landlord changes, nothing comes close to the impending minimum C rating. 

‘It is this alone that will cause me to sell my buy-to-let properties, and I suspect a large number of others. 

‘My properties are old and as such will take a ridiculous amount of money to bring up to a C, even if that were possible, which I suspect it will not be.

‘It is by far the biggest threat to the buy-to-let market and it is within plain sight.’ 

TMW is the latest of many lenders to launch mortgages that are conditional on a property’s green credentials. 

Most are offering higher loan-to-values or lower fees to landlords that own properties with an EPC C or below, though there are some offering better interest rates.  

The Department for Business, Energy and Industrial Strategy is currently consulting on proposals to increase the EPC requirement to a C rating for all tenancies by 2028.

BEIS has said that mortgage lenders could play a key role in meeting the Government’s energy efficiency targets for housing, and suggested that they could be required to track and annually disclose the average Energy Performance Certificate rating of the properties they lend against. 

‘Improving would cost me £5k – and I could be forced to upgrade again’ 

 London-based landlord Peter S. told This is Money: 

‘One flat I own is a pretty Georgian one-bed in North London. All my tenants over 20 years have loved living there, as I did for seven years when younger, and I am always at hand to deal with any problems.

‘The EPC rating is now just below the standard, but to increase it to legal level, I must install gas central heating (being so small it has always been fine with Dimplex heaters). 

‘This will cost me about £5,000 to install, but all signals are gas will then be banned due to environmental costs. 

‘The constant upgrading of requirements is making my business, which has provided great safe and comfortable living for tenants over the years, simply unviable.’

In its announcement of the new deals, TMW referenced the BEIS consultation as the driver behind its decision to only offer the mortgages on homes with an EPC of C or above.

Daniel Clinton, head of The Mortgage Works, said: ‘With impending regulation on the horizon affecting minimum EPC standards across the PRS, we are taking pro-active measures through our lending proposition to support the transition.’  

This week, Paragon Bank expanded its ‘green further advance’ mortgage range, as one of several lenders to venture into this market.

Further advance mortgages allow property owners to access funds to improve their homes.  

Paragon’s new 20 per cent deposit further advances are available for landlords who have four or more mortgaged buy-to-let properties, which are rated A-C, in England and Wales.

One way of improving a home's EPC is by installing better insulation - but some landlords say making improvements isn't worth the cost and they would rather sell their properties

One way of improving a home’s EPC is by installing better insulation – but some landlords say making improvements isn’t worth the cost and they would rather sell their properties

Initial fixed rates start at 3.75 per cent and there are no fees. 

Other lenders that have offered special mortgages or incentives based on EPC ratings this year – either to landlords or owner-occupiers – include NatWest, Nationwide, Barclays, Virgin Money and Kensington Mortgages. 

Prior to that, they were relatively unheard of – but with government pressure unlikely to let up, green mortgages seem to be here to stay. 

Daniel Lee, principal broker at Hamilton Fraser Total Landlord Mortgages, said: This is clearly a condition which will become more prevalent, particularly if in the future mortgage lenders are required to track and annually disclose the average EPC rating of the properties they lend against. 

‘Landlords should take note of this and be looking at ways to make energy efficient improvements to their rental properties, not least so they can achieve the best mortgages rates, but also to protect the saleability and value of their investment.’ 

However, for many, they would rather sell up and leave the market altogether. 

‘I’ll be a holiday let owner instead’ 

Another landlord, who again wanted to be anonymous for fear of unnecessarily worrying his tenants, said: 

‘I am situated in Wales and have a mixture of commercial and residential properties.

‘I have already sold one house last year and will be selling another when it becomes vacant.

‘My reasons for wanting to get out are many, but over regulation in the sector is probably the main one.

The EPC rating rising to ‘C’ is going to hit many landlords hard, because of the ages of some of the properties, it is not economical (or even possible) to bring them up to the required standard, without having to spend considerable sums of money.

‘I am 65 now and I don’t want my benefactors to have a large inheritance tax bill to pay.

‘I have a farm in Monmouthshire with a listed barn and I am going to rent this out for holiday lets, as there is much less hassle and it is a lot more lucrative.’ 

What is happening to buy-to-let rates?

The average two and five-year fixed rates for buy-to-let mortgages are sitting at 2.98 per cent and 3.28 per cent, according to Moneyfacts.

While they have decreased compared to 2019, these are 0.37 per cent and 0.31 per cent higher respectively than a year ago.

Eleanor Williams from Moneyfacts said this was due to lender caution amid the pandemic. 

She added: ‘What is positive is the fact that the overall two-year fixed rate is lower now than in June 2019 – which means those coming off a two-year fixed deal may still find a better deal, depending on how much they have in equity and their circumstances.’

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

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Cladding-hit flat owner to send repair bills to developer after floor collapses

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‘I’ll be sending the bill to the chief executive’: Cladding-hit flat owner hits out at developer after his floor collapses in latest building fiasco

  • Homeowner sees floor at his London flat collapse in latest building fiasco
  • We exclusively reveal the full extent of the damage – a hole that is 40cm by 30cm
  • The damage is the latest question about building work in flats across Britain
  • Many flats have already been hit by the cladding crisis and face huge repair bills 










A leaseholder who is already having to deal with expensive cladding issues has hit out at poor craftsmanship after the floor of his flat collapsed beneath his feet.

Liam Spender explained that he was at home at the weekend when he felt the floor give way.

‘I felt the floor go and moved quickly out of the way. I turned back and there was a dip in the carpet. I nearly fell through the floor,’ he said.

Leaseholder Liam Spender (pictured) has hit out at poor craftsmanship at his London home in Canary Wharf

Leaseholder Liam Spender (pictured) has hit out at poor craftsmanship at his London home in Canary Wharf

Mr Spender lifted the carpet at his London flat near Canary Wharf to reveal the full extent of the damage – a hole that is approximately 40cm by 30cm.

He explained that his flat is across two levels, meaning that the floor between is allowed to be made as it is – with chipboard and wooden joists – and does not need to include concrete. 

However, Mr Spender claimed that the sheets of chipboard were not adequately supported by the floor joists. 

The damaged floor is on a gallery above his bedroom. ‘It could have been a lot worse and I could have gone straight through,’ he said.

Taking to Twitter, Mr Spender explained how the floor was not adequate, saying: ‘There is only air between the floor boards and the room underneath.’

Mr Spender claimed that the chipboard floor was not adequately supported by the floor joists

Mr Spender claimed that the chipboard floor was not adequately supported by the floor joists

The flat owner revealed the full extent of the damage - a hole that is approximately 40cm by 30cm

The flat owner revealed the full extent of the damage – a hole that is approximately 40cm by 30cm

It is the latest challenge Mr Spender has at his building, as he already faces a bill for remediation works due to cladding issues.

‘I’m going to get the bill for fixing the mess on cladding. The broken floor is literally a step too far. 

He said: ‘I’m going to get the bill for fixing the mess on cladding. The broken floor is literally a step too far.

‘I have not had my bill for the cladding issues yet. But I’ll be sending the bill for the floor and the cladding – when it comes – marked for the attention of the chief executive and chairman of Berkeley homes.’

Since the Grenfell Tower fire in 2017, concerns about cladding have become a national issue.

Lenders have refused to provide finance on some types of cladding, leaving some flat owners trapped in unsafe homes that they are unable to sell.

Berkeley Group was approached for comment, but declined to comment. 

Mr Spender said the broken floor was 'a step too far' as he was already expecting a repair bill for cladding issues at his building

Mr Spender said the broken floor was ‘a step too far’ as he was already expecting a repair bill for cladding issues at his building

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How do you feel about the new carbon budgets?

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We want to hear your views on the proposed new carbon budgets which, the Government says, will change how people live and work. The proposed budgets, published by the Climate Change Advisory Council, will apply to every sector of the economy and will outline a limit for total emissions that can be released.

The first carbon budget, which will run from 2021 to 2025, will see emissions reduce by 4.8 per cent on average each year for five years. The second budget, which will run from 2026 to 2030, will see emissions reduce by 8.3 per cent on average each year for five years. The council says the budgets will require “transformational changes for society” but that failing to act would have “grave consequences”. Environmental campaigners say the budgets will provide a cleaner, healthier and safer future but some rural groups such as the Irish Farmers’ Association say they will have “serious repercussions”.

How do you feel about the new carbon budgets?

Now we’d like to hear your views: Do you support the budgets or are you against them; do they go too far or not far enough?

We will publish a selection of your responses online (If you are reading this on the Irish Times app, click here to access the form for submissions).

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House sales shoot up a THIRD in September amid fears of mortgage rate hike

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The number of homes bought and sold in Britain rose by two thirds in September compared to August, with experts believing buyers are seeking to get ahead of a potential rise in mortgage rates. 

There were nearly 161,000 property transactions in September on a seasonally-adjusted basis, a 67.5 per cent increase on the previous month, according to latest figures from HMRC. 

They also increased by 68 per cent compared to September 2020, and 63 per cent compared to the ‘normal’ market average in September 2017 to 2019.

The cost of a mortgage could be set to increase, if the Bank of England base rate rises

The cost of a mortgage could be set to increase, if the Bank of England base rate rises

Experts say the sharp rise was only partly a result of the Government’s stamp duty holiday, which has fuelled price growth of around £25,000 in the last year but finally ended on 30 September. 

It initially allowed buyers to save up to £15,000 in taxes as they did not need to pay stamp duty on the portion of their property purchase under £500,000. 

But in September, the tax break would have had a more subdued effect.

In England and Northern Ireland, it was tapered down between July and September so that buyers could only save £2,500.

And the holiday had already expired in Scotland and Wales, on 31 March and 30 June respectively. 

Given that the impact of the stamp duty holiday was lessening, some suggest that other factors have become more important in maintaining high levels of activity in the housing market. 

There are a number of things at play, according to Lawrence Bowles, senior research analyst at Savills.

‘There’s more to this activity than a stamp duty holiday: record-low mortgage rates, desire for more space, and a core of unmet pent up demand all continue to push up transaction volumes,’ he says. 

Although it is one of several reasons why the housing market remains hot, the desire for a cheap mortgage has become more of a pressing issue for buyers in recent days and weeks. 

This is because speculation about a rise in the Bank of England’s base rate has threatened an increase in the current super-low rates.

At the moment, rates are available as low as 0.89 per cent – but they are already rising. At its lowest, the cheapest fixed rate on the market was 0.84 per cent.

Major lenders including NatWest, HSBC and Barclays have all moved to increase rates on some mortgages, after months of sustained falls. 

With a base rate rise being predicted by some for December, experts are suggesting that the threat of mortgage rates going up is the ‘new stamp duty holiday’ and that the rush to complete sales before rates rise is now keeping the housing market buoyant.

Simon Bath, chief executive of technology company iPlace Global which created the property advice app Moveable, says: ‘We have reached another crossroads in which following the stamp duty holiday, there is another potential deadline for Brits to prepare for.

‘It seems likely that house prices will continue to rise before demand slows down, as Brits race to obtain lower mortgage rates.’

Rising costs: Those buying homes have seen the typical sale price increase by £5,000 in the last month alone, according to data from the property platform Rightmove

Rising costs: Those buying homes have seen the typical sale price increase by £5,000 in the last month alone, according to data from the property platform Rightmove 

Early statistics back his price rise theory up. According to Rightmove’s latest house price index, which covers the first half of October, the average house price jumped £5,000 compared to the previous month. 

In addition, every UK region broke asking price records for the first time since March 2007.

The property portal noted in its report: ‘The continued fast turnover of property for sale and a window of opportunity to buy before a potential interest rate rise seem to have overcome the final expiry of all stamp duty incentives and are keeping activity robust.’

This trend is keeping the market buoyant for now, but could it really lead to another buying frenzy? Iain McKenzie, chief executive of The Guild of Property Professionals, says so. 

‘With demand for properties still high, and a potential mortgage rate rise on the horizon, this could be the perfect storm to see another frenzy to buy, so long as the shortage of stock doesn’t continue,’ he says. 

There is also the simple fact that people who were trying to meet the September stamp duty deadline, but failed, are unlikely to abandon their purchases, and will continue to add to the totals over the coming months. 

But others are less sure about talk of another buying boom. With the base rate rise only tipped to be from 0.1 per cent to 0.25 per cent, the difference in people’s mortgage payments may only be a few pounds per month. 

For example, for someone with a £120,000, two-year fixed rate mortgage on a £200,000 home, the difference between a 0.89 per cent rate and a 1.04 per cent rate would be just over £8 a month, or just under £200 across the fixed period. 

Office for National Statistics data showing house price increases over the past 15 years

Office for National Statistics data showing house price increases over the past 15 years

Mark Harris, chief executive of mortgage broker SPF Private Clients, says: ‘People will still move without stamp duty holidays and will continue to refinance their homes, whether mortgage rates are below 1 per cent or around 2 per cent.

‘Borrowers are keen to secure these historically-low mortgage rates but if the right property comes along, they are still likely to buy even if they have to pay say 15 basis points more and won’t qualify for a stamp duty holiday.’

But as the stamp duty holiday proved, the psychological impact of thinking you are saving money can be powerful, even when the actual cash saving is negligible. 

While buyers did indeed ‘save’ up to £15,000 in tax, house price rises during the stamp duty holiday were upwards of £20,000, eclipsing the actual saving.   

The true impact that the mooted rise in mortgage rates will have depends on myraid factors, including whether there is further clarity on if and when the base rate change might actually happen, and how mortgage lenders continue to respond to the situation. 

All eyes will be on the October transaction statistics and house price indices to see whether the market is remaining buoyant. 

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

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