The Intermediary – July 2025 - Flipbook - Page 41
BUY-TO-LET
Opinion
A white-paper to
shed some light
T
his year has been
momentous at Cotality,
following our rebrand
from Corelogic. It
reflects the breadth of
what we now represent:
collaborative insight, deep industry
understanding, and intelligence
that supports the entire property
ecosystem. As such, you would expect
us to be working hard to support the
industry reach net zero.
Increasingly, lenders’
understanding of climate and net
zero compliance risk as it affects
their balance sheets and origination
appetite is becoming a priority. In the
buy-to-let (BTL) market, the need is
now immediate, though for lenders of
all hues it is very much on the agenda.
Temperature check
Government legislation is set
to enforce a minimum Energy
Performance Certificate (EPC) rating
of Band C on all properties starting a
new private rental tenancy agreement
from 2028, and for all private rented
homes from 2030. The Future Homes
Standard is set for 2030, while new
criteria will apply in EPC assessments
from 2026 – though we are still
waiting for the final detail on those.
There is still much up in the air, yet
lenders know that investing in systems
and processes that are fit for a future
we can see coming takes considerable
time. Partly for this reason, we
commissioned independent research
to find out what lenders are feeling
about it.
Our report, ‘Temperature Check
2025: How prepared are buy-to-let
lenders for future property risk?’
reveals a number of key concerns
that are broadly consistent across the
market. Among the insights gleaned
by gathering views from credit and
risk executives across a range of
specialist UK BTL lenders, building
societies and banks across the UK,
was evidence that some lenders are
currently laying the groundwork to
ensure they limit their own exposure
to ‘net zero risk’ when approving
new loans.
The reality is that loans being
wrien today will still be in term
when the regulations change – raising
several questions when it comes to
regulatory compliance. How lenders
are choosing to approach this varies
across the market.
Some lenders plan to integrate with
more ‘dynamic data sources’ for new
buy-to-let lending, and refinance
to help modernise how they assess
property-level environmental risks
and energy performance.
The research highlighted a number
of potential sources of data, including:
Smart meter data, providing near
real-time insights into actual energy
consumption paerns;
Half-hourly electricity usage and
pricing data, available to suppliers
and aggregators with consent;
Weather and flooding data from
the Environment Agency and the
Met Office;
Satellite and aerial imagery for
monitoring land movement and
surface water;
Open geospatial datasets from
Ordnance Survey and local
authorities;
The Government EPC database;
Property-level retrofit and building
improvement records, where
available, from local councils or
industry schemes.
However, some lenders have not
yet fully worked out how net zero
deadlines will affect their future
lending appetites. When we launched
the report in June, we held a private
event at Bletchley Park. We were
joined by key representatives from
lenders and valuation firms, who
gamely joined in a spirited discussion
around the research.
While it emerged that all lenders
want to act to mitigate the impact
MARK BLACKWELL
is COO at Cotality
of climate change, starting with the
risk siing on their own loan books,
ongoing regulatory indecision at
policy level is holding them back.
Critical work
As a result, lenders and valuers
warned this could lead to intense
competition to lend against EPC band
A, B and C private rented homes
within one or two years.
The research covered other ground,
too, including a broadly held concern
that well-intentioned environmental
policy changes could lead to some very
serious social consequences. There
was genuine worry that moving too
quickly to force landlords to improve
or move their property portfolios
without a workable strategy to fund it
would mean hundreds of thousands of
tenants could lose their homes.
The need to work closely with
those in the social housing sector was
raised as ‘critical’ to avoid negatively
impacting the provision of homes
for those living in rented properties
that will become unleable aer
2028 to 2030.
Lenders are clearly motivated to
play their part in tackling climate
change, beginning with the
environmental risks tied to their own
mortgage portfolios.
While a looming regulatory
deadline is driving urgency, many
lenders are struggling to make the
progress they’d like – largely due
to gaps in data and limited access to
reliable scenario modelling.
The good news is that solutions
do exist, and lenders are exploring
a variety of strategies. But what
our research also made clear is that
reaching net zero is far from simple.
Thankfully, we are ready to help with
the solutions the market needs. ●
July 2025 | The Intermediary
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