The spring budget is scheduled for next week, and I fully anticipate that over the forthcoming days, we will hear a growing number of voices being raised in an attempt to get some sort of government intervention into the PRS, particularly in terms of trying to bring in more supply.
How that intervention might look like or work — or even if it is under any sort of consideration by the chancellor and the Treasury — remains up for serious debate, but I think we might all agree that this issue certainly needs addressing, especially in the context of tenant demand and rising rents.
Where we, as a lender, are trying to provide support is around product choice and accessibility in a marketplace which is still very much recovering from the major upheaval of last autumn.
Product numbers have improved, of that there is no doubt, and we have seen rates fall significantly off those post mini-budget highs, but landlords who are remortgaging now will be doing so onto higher rates than their previous deal — plus, there may be issues in terms of meeting affordability, and let’s not forget what might be required in terms of EPC levels going forward.
That combination of factors makes the market for BTL mortgages somewhat different to what many landlords might have previously encountered, but that in itself does provide advisers with a welcome opportunity to discuss all of the above, as well as the entire portfolio and how it may be utilised in order to deal with specific financial challenges now and in the future.
The EPCs of all properties within a portfolio should certainly be up for review and discussion — not only the work that may be required if they happen to be currently under a level C, but also what finance options might be appropriate to use to carry out this work, and indeed how individual properties within a portfolio can be used in order to ensure the proposed standards are met across all.
One of the areas we have chosen to focus on in the early part of 2023 is our green mortgage range for those properties which have an EPC rating of C or above. Of course, while this does reward those landlords who have got homes up to this level, we also believe it is reacting to a market demand where landlords are now much more inclined to purchase property which has already hit the EPC C level, than opt for those that have not.
That being said, our green product range also, in our view, provides a significant incentive — in terms of the more competitive rates available — to complete work on a property and to achieve that C grade.
We’ve also recognised over recent months, that landlords are looking at different finance time horizons, particularly with rates as they are, but also with their potential to fall lower later this year and/or next. This is why we have added green two-year discount options in both our F1 and F2 tiers, which not only have the benefit of no ERCs — allowing the landlord to move without penalty in the future — but also come with a free valuation and no application fee.
Again, the idea is to keep the upfront costs down for landlords at the point of purchase/refinance, and to give them the price benefit and flexibility that a green discount option can deliver.
Overall, it seems inconceivable that green factors won’t continue to be a major factor in the PRS over the months and years to come, and landlords who want to stay invested, continue purchasing and remain compliant will have to address the questions that will be raised for those properties currently not at the EPC C level.
The best way they can do this is via their adviser and we, as lenders, should continue to offer an array of options designed to support both them in this endeavour.
