The Governor of the Bank of England, Andrew Bailey, has warned the hit to living standards from surging energy prices in the wake of Russia’s invasion of Ukraine will prove shocking.
Speaking at an event in Brussels, Mr Bailey said: “This really is an historic shock to real incomes. The shock from energy prices this year will be larger than every single year in the 1970s.”
I’ll say. The household energy price cap is leaping by £693 to £1,971 in April. Energy providers are already warning that the cap on domestic bills may rise to £3,000 come October. That might even prove to be an underestimate. Based on the movement in markets in March, the cap could go as high as £4,500.
The problem of rising energy prices is exacerbated by the UK’s ageing and very energy inefficient housing stock. At 14 per cent of the UK’s total greenhouse gas emissions, housing has a greater carbon footprint than the farming industry. Now, with the gas and electricity prices rocketing up, the energy chickens are coming home to roost.
For landlords, the problem is compounded by the fact that the housing stock in the private rented sector is even more aged than the UK average – some 36 per cent of properties in the private rented sector were built before 1940.
Just under a quarter of landlords’ properties have an Energy Performance Certificate (EPC) of D or below.
Older properties are more likely to be less energy efficient – and therefore more money to improve.
While regulations should be encouraging landlords to make properties more energy efficient (all existing tenancies should have a C grade EPC by 2028), there are commercial reasons to make improvements sooner rather than later.
When living in a rental property, tenants are generally required to pay the gas and electricity bills. Potentially high energy bills could put off prospective tenants – hitting landlords with longer, very expensive, void periods.
Some tenancy agreements will leave landlords responsible for electricity and gas, where energy inefficiencies will hit the landlord’s pocket directly..
But the average bill for landlords looking to improve their property is between £6,000 and £15,0000.
While heat pump systems are normally three times more efficient than gas boilers, the average cost of installing one is around £10,000.
Even with the right grant, when we asked them, just 38 per cent of landlords told us that they could afford to invest in making their properties more energy efficient. Without external help, landlords would be left tearing their hair out.
Green mortgages offer a solution. Green mortgages provide incentives for the borrower (in the form of a lower interest rate or an increased loan amount) not only to buy a green property – probably a new build – but also to renovate an existing one to make it greener.
The great news is that green product choice in the buy-to-let mortgage sector is as high as it’s ever been.
As of 31 March, there were 369 green buy-to-let products on the market; in August 2021, there were still only 118. Green mortgages now make up 15 per cent of all buy-to-let mortgages.
While we recorded improvements in the level of choice in individual owner products – there are now 321 on the market – green mortgages for limited companies saw even more rapid expansion of choice, rising to 249 deals.
The number of products has risen by more than fivefold since August last year. Green products currently account for a larger slice of the limited company buy-to-let market than ever before – they now represent 19 per cent of the market. This means the options available to eco-minded landlords totally eclipse last spring’s choice.
There’s no question that improving energy efficiency is a critical part of tackling climate change.
Upgrading existing housing stock with energy efficient improvements can lower the housing sector’s carbon emissions – and lower bills.
The Government has committed to making Britain carbon-neutral by 2050 and this offers a roadmap to help the sector get there.
And, with energy prices on the rise, they offer the landlords the chance to avoid being left reeling.
Jeni Browne is a director of Mortgages for Business
Credit: Source link
