Upcoming energy efficiency changes for buy-to-let (BTL) landlords to consider on their properties could prove to be a “danger coming down the track”, SimplyBiz Mortgages has warned.

The mortgage club has suggested that minimum energy efficiency standards that are to be phased in across the BTL market in the coming years could create challenges around landlords’ abilities to raise capital if their properties require upgrades.

Government proposals that all rental properties must have an Energy Performance Certificate (EPC) rating of A, B or C will mean that new tenancies must be at least C rated by 2025, and by 2028 for existing tenancies.

Speaking exclusively to MoneyAge, head of strategic development at SimplyBiz Mortgages, Richard Merrett, said: “What is going to be increasingly important to landlords, whether they realise this or not yet, will be the responsibility to have an energy efficient home, and the minimum energy efficiency standards that are being phased in.

“Part of the challenge they will face is that being able to borrow more to do work to a property on a BTL basis is quite challenging at the moment. We’re seeing a massive uplift in transfer business done in BTL, but extra borrowing is a real challenge.”

Merrett highlighted the BTL market’s shift towards five-year fixed rate plans as a potential area that could pose risk for landlords in the coming months.

“The proportion of two years being done compared to five, both in the residential and BTL market, has been quite a staggering change,” he said. “This is also unsurprising given that the price gap has come down significantly as well.

“However, we’re in a place now where a lot of landlords in the last 12 months and over the next 12 months will either undertake a remortgage or go through a purchase, take a five-year fixed rate, and then find that they’re stuck without the ability to raise capital on it to then do work as these standards become increasingly closer, and more of a requirement. That’s a danger coming down the track.”

Merrett suggested that advisers will have a “massive part to play” in educating landlords in time ahead of the planned changes, but said that lenders and distributors must also work together to raise awareness.

“Ultimately, advisers will have a massive part to play because they are the frontline to the consumer, but I don’t think they have the tools at the moment to do this,” he added. “It is the responsibility of lenders and distributors to work together to raise education and awareness on that.

“This is another area where I’d like to see lenders evolve products, particularly with regards to additional borrowing. We’ve all got to play our part in driving that education and encouraging lenders to adapt their product and proportion set to serve these changing requirements.”

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