According to Cotality, a lender who buys LET “the future” mortgage portfolio is “by looking at the loan method of their properties with lower ratings for energy efficiency.
The Property Data Company’s research notes that the Department of Energy legislation will implement a minimum energy performance certificate rating on all properties, launch a new private lease agreement starting in 2028, and all private rental homes starting from 2030.
It added: “If the deadline is on schedule, it means that landlords are now seeking a fixed rate of five years BTL mortgage for property fixed rates, and before these net zero deadlines hit, the energy performance certificate rating of mortgage C can be rejected.
“This is because a new lease agreement may begin after the 2028 deadline, but may put regulatory risks on loans over the five-year mortgage transaction.”
In its report, the company said some net zero deadlines are already considering how these net zero deadlines affect the property they borrow, “Temperature Check 2025: How can Lenders buy LETs prepare for future real estate risks?
The report gathers views from credit and risk executives from a range of experts BTL lenders, construction societies and banks.
It said: “Some BTL lenders are currently limiting their exposure to “net zero risk” to ensure they approve new loans.
“Others plan to integrate new BTL loans and refinancing with more ‘dynamic data sources’ to help them modernize how they assess environmental risks and energy performance at real estate levels.”
It points out that these sources include:
- Half an hour of electricity usage and pricing data, agreed by suppliers and aggregators
- Weather and flood data for the Environment Agency and Metropolitan Office
- Satellite and aerial images for monitoring land movements and surface water
- Open geospatial datasets from ordnance investigations and local authorities
- Government’s Energy Performance Certificate Database
- Records of property-grade renovation and building improvements that can be done at local councils or industry plans
But the paper notes: “Some lenders have not yet fully determined how the net zero deadline will affect their future loan appetite.”
It added: “A large proportion of BTL lenders acknowledge that their access to this data is still “scattered” that they can make decisions wise enough.”
Data companies noted that lenders and valuation companies have been “warned that this could lead to fierce competition to oppose Energy Performance Certificate A, B and C private rental homes within one or two years”.
It added: “This could put private landlords at a disadvantage when trying to ensure BTL mortgage financing before the government’s net zero deadline takes effect.”
Mark Blackwell, chief operating officer of Cotality in the UK, said: “Lenders are clearly eager to take advantage of mitigating the effects of climate change, sitting on their own loan books from climate risks.
“There is an imminent regulatory deadline that requires them to do so, but in our study we found that many people are not out of reach without more powerful data input and better access to model schemes.
Blackwell added: “There are some ways to solve this problem, and our research highlights that lenders are taking a broad approach.
“However, it is not easy for everyone to meet the challenge of net zero, which will require collaboration across all parts of the market in such a short time to achieve it.”
The Department of Energy reiterated its plan, which proposed in August last year that all private landlords must meet the C-performance Certificate rating by 2030, which is better than the current lowest E-rating.
The department estimates that 48% of private rental housing in England have met C standard, adding that by 2030, the upgrade will put landlords on average between £6,100 and £6,800.
Landlords in the UK face a £21.5 billion bill to upgrade their properties to a new green government standard, according to a report on zero deposits from rental deposit companies released last September.
