Buy-to-let lenders are beginning to reassess their approach to mortgage lending, particularly in regard to properties with lower energy efficiency ratings. This shift comes as part of their efforts to future-proof their portfolios and prepare for upcoming environmental regulations.
Recent research has shown that lenders are increasingly factoring energy performance into their lending decisions. The move is driven by growing awareness of environmental risk and the upcoming regulatory changes linked to the UK’s net zero goals.
From 2028, all rental properties starting new tenancies will be required to hold a minimum Energy Performance Certificate (EPC) rating of band C. This requirement will be extended to cover all existing private rental homes by 2030.
Because of these future rules, landlords who are now trying to secure a five-year fixed-rate buy-to-let mortgage may find it difficult if the property in question has an EPC rating below band C. Lenders are becoming more cautious well before the actual deadlines are enforced.
A new report by property data insights and workflow platform Cotality sheds light on how lenders are already adapting to these future changes. It suggests that some lenders are proactively taking steps to align their lending practices with the UK’s climate targets.
According to the report, there is evidence that a number of buy-to-let lenders are currently laying the groundwork to reduce their exposure to what is now being termed “net zero risk”. This includes being more selective about the properties they are willing to finance.
To support this shift, some lenders are planning to adopt more advanced data sources to improve how they assess environmental and energy-related risk at the property level. This could significantly change how mortgages are approved and priced in the future.
Cotality’s report highlighted various emerging data sets that may soon play a key role in lending decisions. One such source is smart meter data, which can offer near real-time insights into a property’s actual energy usage.
Another promising data stream includes half-hourly electricity consumption and pricing data. This kind of detailed information can provide lenders with a clearer picture of how energy-efficient a property really is in day-to-day operation.
In addition to energy data, lenders are also expected to utilise external datasets such as weather trends and flood risk information. These could be sourced from public bodies like the Met Office or the Environment Agency.
Satellite and aerial imagery are also being considered. These visuals can help lenders identify risks related to land movement, surface water accumulation, and other environmental threats that may impact a property’s long-term viability.
Open geospatial datasets provided by Ordnance Survey and local authorities may also be incorporated. These datasets can offer valuable insight into the local environment and infrastructure.
Furthermore, access to the government’s EPC register will continue to play an important role. Lenders can verify whether a property meets the minimum requirements and track any improvements made.
Local councils and industry organisations may also provide retrofit and building improvement records. These can show whether a landlord has taken meaningful steps to upgrade a property’s energy performance.
However, despite some lenders moving ahead with these changes, the report notes that many others are still unsure how the net zero targets will affect their long-term lending strategy. There is currently a degree of inconsistency across the sector.
With regulation deadlines drawing closer, it is likely that more lenders will soon follow suit. The buy-to-let mortgage landscape may look very different over the next few years, with environmental considerations becoming just as important as financial ones.
A growing number of buy-to-let lenders have acknowledged that their access to environmental and energy performance data is still inconsistent. Many described their current data coverage as “patchy”, which limits their ability to make confident, well-informed lending decisions based on property-level energy efficiency.
This lack of robust and reliable data poses a challenge, especially as lenders try to adapt their policies in response to upcoming regulatory changes tied to the government’s net zero commitments. Without accurate data, the risk of making poor lending choices increases, particularly when it comes to energy-inefficient properties.
At a private event held in June to launch the latest research findings, representatives from major lenders and property valuation firms raised concerns about how these challenges could reshape the market. They warned that within a year or two, lenders could begin aggressively competing to finance only those rental properties that already meet higher energy performance standards.
This means that properties with an EPC rating of A, B or C may become far more attractive to lenders, leading to greater competition in that segment of the market. At the same time, landlords who own less efficient properties may struggle to find lenders willing to offer them buy-to-let mortgage products.
For those landlords, especially those looking to remortgage or expand their portfolios, securing finance could become increasingly difficult unless energy upgrades are completed. With EPC regulations tightening by 2028 for new tenancies—and by 2030 for all rental homes—time is of the essence.
Mark Blackwell, Chief Operating Officer at Cotality UK, provided insights into the current mood within the lending sector. He explained that most lenders do, in fact, want to take meaningful action to reduce their exposure to climate-related risks, starting with their existing loan books.
According to Blackwell, there is a regulatory imperative that is pushing lenders to act. However, during the firm’s research, it became clear that many financial institutions feel they are not yet fully prepared. In particular, the absence of high-quality data and the inability to model realistic climate scenarios are holding back progress.
While some lenders are more advanced than others, the research indicated that there’s no one-size-fits-all approach. Instead, a variety of strategies are emerging across the sector. Some lenders are investing in better data infrastructure, while others are forming partnerships with environmental data providers to strengthen their risk assessments.
Despite these efforts, a shared concern emerged from the study: that the transition to a greener, more energy-efficient housing market will not be straightforward. Achieving this will require significant coordination between different parts of the property and financial services industries.
Blackwell noted that the task ahead is considerable. He stressed that success will depend on cooperation across the entire market—including lenders, landlords, regulators, valuers, and data providers. Only by working together can the sector meet its obligations in the limited time remaining before the government’s net zero deadlines come into force.
The next few years are expected to bring major changes to how mortgages are assessed, priced, and approved. Energy performance is no longer a peripheral concern; it is fast becoming central to lending decisions in the buy-to-let space.
If action is not taken quickly, landlords with subpar EPC ratings may face reduced options and higher borrowing costs. In contrast, those who invest in energy-efficient upgrades could find themselves in a stronger position as lender preferences shift.
With the 2028 and 2030 deadlines fast approaching, the pressure is now on all market participants to accelerate their preparations. Whether through regulatory compliance, data improvements, or property upgrades, the race toward net zero has already begun.