Fears energy efficiency ratings will cause mortgage delays

Brokers are concerned that energy efficiency regulations will stall mortgage approvals, despite lender reassurances.

Lenders are currently updating their broker marketing material in relation to the new regulations, but have little time with a deadline of 1 April looming.

Brokers are concerned that they could face additional paperwork as a result of these changes.

With just weeks to go to the deadline, question marks remain as to how this change could impact affordability calculations. From 1 April this year privately rented properties will be required to have a minimum performance rate of an ‘E’ on their Energy Performance Certificate.

Any grade below this will make the property illegal to let, and will incur a fine of up to £4,000. The regulation begins on 1 April for new lets and tenancy renewals and will apply to all existing tenancies from 1 April 2020.

Mortgages for Business sales director Steve Olejnik says: “Some lenders are pointing out that solicitors will be responsible for checking these certificates have the required EPC rating.

“However, brokers will need to raise these issues at the start of the process. Otherwise they run the risk of the application being turned down at a later stage.” If clients don’t have the necessary EPC rating, this will slow down the mortgage application, he says.

Olejnik says lenders have been “very slow” to update brokers about this issue. As a result he says many brokers may still be unaware of these changes, and the impact on clients.

Specialist buy-to-let lenders Kensington Mortgages and New Street have recently updated their buy-to-let marketing material.

Kensington Mortgage sales and marketing director Craig McKinlay says: “As a lender we are making sure our brokers are aware of this change. Solicitors will now adhere to special conditions being applied to each buy-to-let case and,regardless of the number of properties held in a portfolio, they will all have to individually satisfy the minimum EPC rating.”

However, he says it is the responsibility of the solicitor acting on behalf of the borrower to ensure the property has the required minimum EPC rating. A number of lenders have already updated their criteria. Accord, for example, has required properties to have this EPC certificate from November last year.

Most BTL lenders contacted by Mortgage Strategy would not comment on whether they had updated their lending criteria.

Questions remain as to how lenders will assess portfolio landlords, particularly when a property does not have the required certificate.

Olejnik says: “From April this will only apply to new tenancies or renewals. But we expect some lenders to ask further questions about other properties in a portfolio: when these tenancies expire and how much it will cost to get this accommodation up to the required standard. This could impact affordability calculations.”

Recently there have been efforts to educate landlords on the changes, including a tool launched by Mortgages for Business that allows landlords to check a property’s EPC rating.

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