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How Does the Energy Performance Certificate (EPC) Rating Affect My Buy-to-Let Mortgage?

What you need to know about the minimum energy efficiency standards (MEES) required for a buy to let property and how it can affect your mortgage

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Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: August 25, 2021

Since 1st April 2018 all private rented properties, either as new lets or tenancy renewals, were required to hold an Energy Performance Certificate (EPC) with a minimum rating of E.

These changes to the regulatory guidelines for minimum energy efficiency standards (MEES), introduced by the UK government, will come into force for all other existing tenancies from 1st April 2020.

This article looks at how these new laws will affect private landlords, specifically those who purchased their property using a buy-to-let (BTL) mortgage.

If you’re a private landlord with a buy-to-let mortgage and you’re concerned about the changes to EPC ratings give us a call on 0808 189 2301 or make an enquiry so we can arrange for one of the experienced advisors we work with to get in touch.

What is the minimum EPC rating for a buy to let (BTL) property and how does this affect landlords?

As outlined above, the minimum EPC rating for a buy-to-let (BTL) property is now E, unless an applicable exemption exists (see below). Any breaches of this law could result in a civil penalty.

This means any private landlords, who hold properties with an EPC rating of F or G in their portfolio, will not, by law, be able to rent out those properties to any new tenants until appropriate energy efficiency improvements have been completed.

This also extends to business premises. However, for existing tenancies, the rules apply from 1st April 2023.

Examples, where exemptions can exist outside of these requirements, include:

  • Buildings where energy efficiency improvements would unacceptably alter their character and/or appearance (listed buildings)
  • Buildings with a planned usage of less than two years
  • Buildings intended to be used for less than four months in a year
  • Standalone buildings with a total floor area less than fifty square meters
  • Holiday lets
  • Agricultural tenancies (more than 2 acres of land)
  • Accommodation for asylum seekers

Landlords can also apply for a five year exemption in cases where they cannot complete work because they are unable to ascertain the appropriate consent or where improvement costs will exceed a certain amount.

New landlords can apply for a temporary six month exemption in order for all the work to be completed on a recently acquired property. All exemptions should be recorded on the UK government’s PRS exemption register.

If you’d like more information about how the recent changes to the minimum energy standards for rented properties may affect you get in touch and we can arrange for a specialist to speak with you directly.

How will these changes to EPC ratings affect a buy-to-let (BTL) mortgage?

As a whole, these changes should only affect a small proportion of landlords who purchased a property using a buy-to-let (BTL) mortgage. Most properties built over the last twenty years would most likely already meet the minimum energy standards required.

If you’re applying for a new BTL mortgage, lenders will now request a copy of the most recent EPC rating before they can approve your loan. If the rating is lower than E, your application will more than likely be declined or you will be required to get the EPC rating up to E or above before they will complete.

Could an EPC rating below the minimum standard affect the value of my buy-to-let property?

Yes, if you currently own a rental property with a substandard EPC rating, which you’re either looking to sell or re-mortgage, it will be reflected in any mortgage company’s valuation.

It’s generally recommended, in light of the new regulations, to ensure you already have the appropriate EPC rating of E or above before considering the sale or refinance of your property.

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What are my options if my buy-to-let property doesn’t meet these minimum standards?

If your property does not meet these minimum standards the most obvious straightforward option you have is to make the necessary energy efficiency improvements.

If you own an older property with an EPC rating below E, you can apply for a five-year exemption if the costs for these improvements exceed a certain amount.

In many cases, the costs involved in order to receive an EPC rating of E or higher would not necessarily reach this level. The average EPC rating in the UK is D, therefore the typical costs to move from a rating of G or F to E would usually not be so high.

Another option you have is to apply for a Green Deal finance loan which are specifically available to improve the energy standards of UK properties.

If you’d like to know more about which providers offer this type of finance, get in touch and we can arrange for one of the advisors we work with to help you find a lender who can offer the best terms for your specific requirements.

All of the experts we work with are whole-of-market buy to let brokers with access to every lender across the UK.

Speak to a buy-to-let mortgage expert

If you have a low EPC rating on a buy to let property it’s important you take steps to make the necessary improvements and achieve the minimum standards required as this could affect your chances of remortgaging existing finance in the future.

The advisors we work with can offer the expert knowledge and advice you need, tailored to your own circumstances. Call us on 0808 189 2301 or make an enquiry to get started.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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