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Feature: Go for green and get the best rates

By Paul Brett, managing director, intermediaries, Landbay

Consumers are only now beginning to adjust to April’s hike in fuel prices and, with another hefty increase in bills expected in October, higher energy costs are set to present continuing challenges for tenants and landlords.

The longer-term goal has to include improving the environmental performance of rental properties, and mortgage finance can help towards this end. Our range of green mortgages are available at discounted rates, and landlords can use this option to improve energy efficiency. That will help to contain costs for tenants and so make their properties more attractive – with better returns and prospects for stronger investment growth.

Despite the well-documented increases in energy costs, most adults currently paying off a mortgage or facing rent bills appear to be managing their finances remarkably successfully. A recent survey by the Office for National Statistics reported that only 3% of adults claimed to be behind on rent or mortgage payments.

But nearly nine out of 10 adults had noticed an increase in their cost of living over the last month, with renters (39%) more likely to be affected than mortgagors (21%). “This is impacting on people’s financial resilience,” said Hugh Strickland, of the ONS, “with more telling us they are finding it harder to save money in the next 12 months.”

Coping with higher bills

With consumers finding it harder to save over the coming year, what are the options for landlords and tenants as they seek to adjust to higher energy bills? founder Martin Lewis says that most energy suppliers are now already charging up to the maximum allowed under the standard variable rate price cap, so options to switch are almost non-existent. During the summer months at least, consumers will be able to turn down their thermostats and reduce their heating bills.

Some of those living in HMOs might also be protected if they have been fortunate enough to negotiate all-inclusive deals that cover their energy bills. But in those circumstances, it is landlords who may often be bearing the higher costs.

But if landlords can also help mitigate the effects by investing to make their properties more energy-efficient, it may prove to be a good move for their businesses, as well as for the environment.

It now looks certain that properties with improved energy efficiency will be a lot more attractive to tenants in the future. Homes that are less expensive to heat may produce better returns for landlords and suffer fewer void periods, as tenants begin to recognise that they have got a good deal and decide to stay put. And a property that is more attractive to tenants may also see better long-term capital growth – and an easier sale when the landlord decides it’s time to cash in the investment.

Mortgage finance and improved energy efficiency

Making a home more energy efficient could also result in an improved environmental performance rating. That will make the property even more attractive as the country moves towards the target of at least a C rating for new tenancies by 2025 and for existing ones by 2028.

Mortgage lenders have been rising to the challenges, and Landbay has been one of the first to introduce a range of lower-priced deals to encourage better environmental performance.

Our range of green mortgage offers some of the best rates for properties with an A-C environmental rating. We also recognise that some rental properties do not yet meet the highest environmental standards but, in those circumstances, landlords can still access attractively-priced mortgage finance to invest in their properties to make them more energy efficient.

To help brokers and their landlord clients understand the options available to them, we offer a tailored underwriting service to support their knowledge of the latest market regulation and a specialist lending team dedicated to delivering a faster and more efficient service.