Mortgage lenders are increasingly offering green buy-to-let deals to reward landlords with energy-efficient properties, as the UK government moves to phase out less energy-efficient homes as part of its commitment to become more environmentally friendly.
In this article, we explain what green buy-to-let mortgages are and what a property needs to be eligible for one, as well as our list of the best deals on the UK market for landlords.
What is a green buy-to-let mortgage?
A green buy-to-let mortgage offers buyers intending to rent out a property favourable terms for choosing one that is more energy-efficient, or making improvements to the property which make it more environmentally friendly. Usually this involves lower interest rates or cashback. They are typically available for new-build properties as these are more likely to be built to modern energy efficiency standards, but green buy-to-let mortgages can also apply to older properties that have been renovated to meet current requirements.
What are the requirements for a green buy-to-let mortgage?
Individual lenders have different requirements for how energy-efficient a property needs to be in order to qualify for a green buy-to-let mortgage. Usually this decision is based on the property’s Energy Performance Certificate (EPC) rating - which is required for any home being built, let, or sold - and should be arranged by the seller or landlord.
An EPC puts a property on a scale from A to G - A being the most energy-efficient - and helps to form a general idea of the estimated energy costs of the property. It can also indicate the potential cost of implementing changes to make the property more energy-efficient. For example, if the property currently has an EPC rating of E, it will probably be quite an expensive task to make renovations to lift it up to an A.
New-build homes tend to have higher EPC ratings, while older properties typically have lower ratings, often around D or E. The average EPC rating for a home in the UK is D.
Most lenders will require that the property achieves an EPC rating of between A to C in order to be eligible for a green buy-to-let mortgage. You will need an accredited assessor to give your property an EPC rating. You can search for an assessor near you using the following links:
Should you get a green buy-to-let mortgage?
Although landlords are not currently legally required to get a green buy-to-let mortgage, the UK government’s Department for Business, Energy and Industrial Strategy is currently consulting on plans to increase the EPC requirement to a C rating for all tenancies by 2028.
If you are letting properties, or you are intending to, you should consider that green mortgages are most likely here to stay and may even become the norm in the future. You may want to consider ways to make energy-efficient improvements to your rental properties, not just so you are eligible for more favourable mortgage rates, but also to protect your properties’ market appeal going forward.
What are the best green buy-to-let mortgages?
We have collated the best green buy-to-let mortgages in the UK in the following table, as well as a summary of the terms for each one in the list below.
|Paragon Bank||The Mortgage Works||Foundation Home Loans||Landbay||Keystone|
|Mortgage Type||Fixed Rate||Further Advance||Variable Rate||Fixed Rate||Fixed Rate|
|Rate||2-Year and 5-Year starting at 3.75%||2-Year and 5-Year at 1.49% + borrow from £2,500-£15,000 for energy-efficiency renovations||2-Year between 1.99%-2.49% depending on EPC rating||2-Year at 3.09-3.14% or 5-Year at 3.39-3.44% depending on EPC rating||2-year at 2.99%, 5-year at 3.09%|
|EPC Rating Requirement||A-C||B-G||A-C||A-C||A-C|
Paragon Bank has a range of green buy-to-let mortgages with 4 exclusively available for properties with a verified EPC rating of either A, B or C. All have a maximum LTV of 80% and are available to landlords who have a minimum of 4 buy-to-let properties in England or Wales under their personal name or through a limited company. These deals are available for single self-contained units (SSCs), houses in multiple occupation (HMOs), and multi-unit blocks (MUBs).
The Mortgage Works
The Mortgage Works, Nationwide's buy-to-let wing, offers a ‘Green Further Advance’ mortgage with a lower initial interest rate than its standard ‘Further Advance’ mortgages for landlords to implement energy-efficient home improvements. You can borrow from £2,500 up to £15,000 for these renovations - which include setting up solar panels, insulating your loft, or installing an electric car charging station - on top of a maximum mortgage LTV of 75%.
Foundation Home Loans
Foundation Home Loans offers a green buy-to-let mortgage to landlords purchasing properties with an A, B or C EPC rating, or remortgaging properties with an EPC rating of C or above, which is available to both portfolio and non-portfolio landlords. The rates depend on the EPC rating of the property, with a 2-year variable rate starting from 1.99% for A-rated properties, up to 2.49% for C-rated properties, with a maximum LTV of 75%.
Landbay offers a range of green buy-to-let products for properties with an EPC rating of A or B, although rates differ depending on the EPC rating of the property and whether the landlord has a portfolio or not.
There is a standard 2-year fixed rate at 3.09% or a standard 5-year fixed rate mortgage at 3.39% with a maximum LTV of 75% available for portfolio landlords on properties with an EPC rating between A and B. Or there is a 5-year fixed rate mortgage at 3.25% with a maximum LTV of 75% for non-portfolio landlords for properties rated between A and B.
Portfolio landlords with properties with an EPC rating of C can get a standard 2-year fixed rate at 3.14%, or 3.44% on a standard 5-year fixed rate, with a maximum 75% LTV. Non-portfolio landlords can get 3.30% rate on a standard 5-year fixed rate deal for a C-rated property with a maximum LTV of 75%.
Keystone has a standard buy-to-let green mortgage available for properties aged 5 years or older and worth between £50,000-£1m with an EPC rating between A and C. There is a 2-year fixed rate at 2.99% or a 5-year fixed rate at 3.09% with a maximum LTV of 65% for both.
More buy-to-let tips
For more advice for landlords, check out our "27 point checklist of a successful buy-to-let landlord" or our article "Buy-to-let tips: The 8 things that can kill your buy-to-let investment".