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New Mortgages for Energy Efficient Rental Properties

Paragon Bank has launched a range of buy-to-let mortgages with lower interest rates for energy efficient properties.

The 80% LTV mortgages charge a market-leading 3.99% interest, fixed for five years, exclusively for rental properties which earn an energy performance certificate (EPC) of A to C. The loans can be used for the purchase and remortgages of self-contained properties and houses in multiple occupation (HMO).

The lender hopes the new mortgages will encourage landlords to invest in the energy efficiency of their properties.

The number of properties in the private rental sector with an EPC of A to C has increased 272% over the past decade to 1.8 million. However, around six and ten homes in the sector still are at a grade D or lower.

Energy inefficient properties are expensive for tenants to heat and frequently dangerously cold. A government survey of the country’s housing stock has found that homes below an energy efficiency ratio (EER) of C cost an average of £500 more to heat each year than properties that achieve a C or better. Those high costs leave a disproportionate number of private tenants in fuel poverty—25% in England, compared to 10% across the wider population.

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The most energy inefficient rental properties are on average 2⁰C colder in winter than the most efficient homes, posing risk to tenant health.

Inefficient rentals are also responsible for high levels of carbon emissions. Nationally, energy use in homes account for around 14% of the UK’s greenhouse gas emissions and any pathway to net zero requires investment in insulation, double and triple glazing and low-carbon heating systems in homes.

Under proposed regulations, which the government began consulting on last autumn, all homes in the private rented sector will need a minimum EPC grade of C or better for new tenancies by 2025. All privately rental properties will need to achieve that grade by 2028.

Richard Rowntree, managing director of mortgages at Paragon Bank, said: “Landlords have made great strides in adding more energy efficient homes to the PRS – or upgrading properties to C or above standard—over the past decade. However, more needs to be done as the Government moves towards its net zero carbon target by 2050 and landlords have a key role to play in that.

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“Our new range of products at 80% LTV for homes with an energy rating of C or above will be an incentive for landlords to add energy efficient homes to the sector, benefitting tenants through lower energy bills and the environment through reduced consumption.”

Landlords, along with other homeowners, were extended some help in upgrading their properties with the government’s Green Homes Grant scheme. The initiative offered homeowners up to £5k to cover two-thirds of the cost of energy efficiency upgrades. However, the project was dogged by difficulties and was shuttered prematurely at the end of March, having issued just 28,000 vouchers for work and seen just 5,800 energy efficiency measures installed.

Source: Money Expert

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Majority of landlords waiting for lockdown measures to ease before investing

Over half (59.8%) of BTL landlords are waiting for lockdown measures to ease before investing in properties, according to the National Landlord Index by Accommodation.co.uk.

The research highlights that UK landlords still see the rental market as a safe place to invest especially as the stock market has been so volatile during the pandemic.

This desire from landlords to expand their property portfolios in 2021 is reflected in the demand for buy-to-let mortgages with the index revealing that nearly two-fifths (37.8%) of landlords are planning to apply for one this year.

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As the UK starts to see the benefits the vaccination has on the economy, Accommodation.co.uk says it is “clear” that landlords are optimistic that this recovery will be reflected in house prices long-term.

Aaron Short, founder and chief executive at Accommodation.co.uk, said: “We are always listening to our landlords and tenants to understand the needs of the market and this is why the National Landlord Index remains so important.

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“Understanding how BTL landlords are being impacted by lockdown measures and what their plans are post-pandemic help us to understand the future lettings market. It is great to see landlords looking to expand portfolios and generally positive about the future and this certainly mirrors the growth we have seen at Accommodation.co.uk.

“We have been at the forefront of updating this archaic industry and we believe our award-winning model offers tenants and landlords the best solution in the current market.”

Source: Property Wire

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BTL mortgage availability at pandemic high

The availability of buy-to-let mortgages has remained relatively high during the pandemic, giving landlords cause for optimism, according to Moneyfacts.

Figures from the data provider showed there were 1,976 buy-to-let products available in mid-January, fewer than before the pandemic began but more than the 1,455 available in May.

The provider also suggested lender confidence as the number of deals available in the 80 per cent LTV tier has risen by 26 since December.

Average rates have also increased, with two- and five-year fixed rates standing at 2.92 per cent and 3.29 per cent respectively for all LTV brackets, the highest levels recorded by the provider since November 2019.

But Eleanor Williams, finance expert at Moneyfacts, warned the market has been “volatile” since the start of this year.

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She said: “Lenders have been adjusting their offerings and consequently availability continues to fluctuate – there are now 27 fewer mortgage products on offer than there were just a couple of weeks ago, and so those considering exploring a new BTL mortgage could do well to secure the knowledge and advice of a qualified adviser, to ensure they keep abreast of any relevant changes.”

Buy-to-let mortgage market analysis

PRODUCT NUMBERSJan-20Mar-20May-20Dec-20Jan-2115.1.21
BTL product count – fixed and variable rates2,5832,8971,4551,8182,0031,976
All 80% LTV BTL products – fixed and variable rates2973681974100100
AVERAGE RATESJan-20Mar-20May-20Dec-20Jan-2115.1.21
BTL two-year fixed – all LTVs2.82%2.77%2.51%2.89%2.89%2.92%
BTL five-year fixed – all LTVs3.19%3.24%2.94%3.25%3.27%3.29%
Data shown is as at first working day of month, unless otherwise stated. Source: Moneyfacts.co.uk

The Intermediary Mortgage Lenders Association has meanwhile highlighted the opportunity for remortgage business from landlords who took out five-year deals before the stamp duty surcharge was introduced in 2016.

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The trade association predicted the five-year anniversary of the surcharge would enable demand in the mortgage market to stay strong this year despite the end of the stamp duty holiday.

A survey by Paragon Bank also found that half of buy-to-let brokers said they would focus on five-year remortgage business when the stamp duty holiday ends.

But Kevin Dunn, director at Furnley House, commented that he expected demand to fall.

Mr Dunn said: “Whilst demand has remained strong in this area over the last six months, I expect demand in buy-to-let mortgages to decrease once the stamp duty holiday ends at the end of March, however not quite in the same way it fell off a cliff when the stamp duty surcharge was announced at the beginning of 2016.”

By Chloe Cheung

Source: FT Adviser

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