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    Hi Boletus

    Long time no communication.

    Even if the Opt Out is exercised the lender will indeed seek a copy of the current EPC if it is being asked to either do a product transfer or a new remortgage application: furthermore the surveyor on carrying out the property inspection will request the same if not already provided in the submission.

    A lender has a right to ensure that its financial interests are protected and as BtL's are unregulated like all commercial lending and if it is found that the property is being let without the appropriate EPC being in place it could as a last resort appoint a Receiver of Rent to manage out the asset just as they did in 2007 when concerns were raised regarding the conduct of mortgages and which in some instances showed further abuses being undertaken by the landlord. Yes it is as a last resort but one does not risks in ignoring whatever legislation is in place.

    One call today from a lender confirmed that serious consideration is being made in being able to provide additional funding to assist landlords in meeting the intended EPC changes , on what basis is unknown but it is clear that lenders are increasing their focus on lending to EPC's with A,B,C. The start in 2025 is not that far off.

    As I concluded in my OP I am making forum readers aware of what is going to happen and more publicity will be given as the time nears for the initial changes.


      I was making two separate points, I should have posted them separately.

      The first being landlords will opt out of the register if it is (increasingly) used against them -and not just by mortgage lenders.

      The second was, which exact t&c will they use to call in the loan? After the disgusting way they behaved post 2007, I don't doubt they will use it as a first resort if it suits them.


        On a more positive note, there is currently a 'high cost' exemption for F&G properties needing over £3500 improvements. Something similar would very likely apply for D&E's;

        Also worth pointing out that many lenders are offering green further advance loans to cover such improvements.


          The proposed legislation changing the requirement to be C raises the high cost exemption to £10,000.

          A change of that nature would cause me to exit the business.
          I'd either have to sell a property or mortgage one to be able to afford the exemption (or to get some of the properties to a C) and it just stops the business being worthwhile against other investments.
          I'd have to get out early to make the most of the increase in property prices, which sucks for my tenants who I feel a little bit sick about, but I'm prepared to hold my nose and do it.
          When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
          Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).


            Originally posted by jpkeates View Post
            The proposed legislation changing the requirement to be C raises the high cost exemption to £10,000.
            Do you think that cap level is likely? The consequences are quite obvious.

            (On a personal note, this would be a win for me as all my rentals would quite easily get to C and it would drive out the competition. Plus I'd upgrade my F ppr to a bigger F ppr.)


              Originally posted by boletus View Post
              Do you think that cap level is likely?

              (On a personal note, all mine would quite easily get to C)
              The Minimum Energy Performance of Buildings Bill which is only a start point set the limit at £20,000.
              In discussions, there was a view that that figure might have to be reduced to £10,000.

              That was a private members bill.
              But it was the work of the MP who was murdered and the government has "indicated" that they won't let David Amess' good work go to waste.

              I am not an expert on energy efficiency (and don't really know how to even start serious consideration of increasing the EPC of a building), so I'm pretty much stuck looking at the recommendations on the EPC documents of the properties.
              There's nothing obvious I can realistically do for just over half of them.

              And there is a degree of "you know what, it's not worth it" about it.
              Faced with the idea of lots of builders, lots of expense, lots of delay, lots of jobsworth admin, I'm happy to sell up, stick the money into my other investments which are 100% passive and just forget the very small amount of work I do for a living.

              I'd have a slightly less profitable portfolio, but the income would be slightly up and the growth slightly less - which, as I am approaching pensionable age, probably isn't too bad an idea.
              A lot of it is tax efficient too, so it'll be a minor act of revenge on the government!
              When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
              Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).


                Thank you both for your constructive responses, it is evident from your views particularly as you are seasoned professionals that a significant number of less well informed investors will possibly take fright at the ramifications of the proposed changes. Although I am an investor as well as a specialist BtL broker I am taking time out to examine all of my clients properties to determine their respective vulnerabilities on this topic and to help them understand the implications with or without obtaining further funding on current loans.


                  I suspect the reverse will be true, to be honest.
                  I suspect that many (most?) landlords don't have any idea of most of the recent changes in regulations for landlords - the people who contribute to this forum are not representative of landlords in general.

                  The awareness of landlords I encounter generally of the EPC and EIRC requirements is frighteningly close to zero.
                  I still meet people "protecting" deposits in building society accounts and think a Gas Safety Certificate is a one off thing.
                  I've never met a landlord or agent who knows the smoke alarm regulations, full stop.

                  So I suspect any EPC change will go unnoticed for some time, hidden by the furore about section 21 notices - which is something that isn't an issue for almost all landlords, but about which people seem incensed.
                  When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                  Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).


                    Talking with senior individuals of several leading lenders within the Buy to Let sector it would appear that there is a general consensus that the ultra low fixed rates will become history within the next two/ three weeks, the base cost of money market rates has now reached 1.50% before lenders apply their respective premiums so if you have mortgages which may be coming out of their present incentive rates now is the time to speak with your brokers, failure could result in a “ If only I had acted earlier” even on residential mortgages the Halifax is amongst some who have announced increase in a number of products.


                      Further to my posting a few days ago I have read an interesting article in a Trade Publication which suggests that the current scenario might have a negative impact on capital values of property. The author is not prone to scare mongering and is highly regarded in the Financial sector.

                      "Mortgage rates will rise to an eight-year high by 2023 putting homes at risk of being overvalued, it has been said.

                      In its market prediction, Capital Economics said this would be because of constraints on mortgage affordability. It assessed that along with a 34 per cent rise in house prices since 2014, higher mortgage rates will cause the cost of repayments to account for 46 per cent of median income rather than 38 per cent.

                      Andrew Wishart, senior property economist at Capital Economics, also said as lender interest margins were now at their narrowest since before the 2008 financial crisis, any increases to the Bank of England’s base rate would be passed through to borrowers.

                      The firm revised up its prediction for the base rate, saying it now expected this to increase to two per cent by the end of next year rather than the originally proposed 1.25 per cent.
                      Wishart said this would be caused by continued wage and price pressures.

                      “We are therefore raising our forecast for the average mortgage rate on new lending from 2.5 per cent to 3.2 per cent by mid-2023, which would be the highest since 2014,” Wishart added.

                      This is in light of a poll of 40 economists conducted by Reuters between 7 and 11 February, which found two thirds expected the base rate to rise to 0.75 per cent at the next meeting in March


                        Impact of Inflation for Affordability on Residential Homeowner mortgages

                        I am copying an article produced by Mortgage Broker Tools which focuses on the impact on the affordability assessment for residential home loans, clearly with Inflation now predicted to rise to at least 9% by later this year this will have a significant bearing on how much can be borrowed.
                        Most of the main lenders use data from the ONS when making such assessments but many smaller lenders still work on the figures declared for items like Gas, Electricity Food , so it is important to have a conversation with a mortgage advisor who will have systems in place to identify those whose criteria is slightly more accommodating.
                        The impact of inflation on affordability

                        MBT Affordability Insights: The impact of inflation on affordability

                        Inflation is very much in the news at the moment, but just how will the ever-escalating cost of living affect mortgage affordability?

                        The recent surge in inflation is leading to higher prices for everyone and has stimulated the recent increase in market interest rates. This increase has already been factored into the cost of fixed rate mortgages to some extent, but swap rates are continuing to rise.

                        From an affordability perspective, however, it’s worth noting that lenders already stress affordability at much higher rates, so there remains a question mark over whether the current situation will have any impact on mortgage affordability.

                        The Bank of England is currently considering allowing lenders to stress affordability at much lower rates, but as the cost of fixed rate mortgages rises, those lenders that use five-year fixed rates to assess affordability may have to rein in how much they will lend.

                        The main issue, however, will be how substantial increases in the cost of living will show themselves in the ONS' figures and HSBC has already hinted that affordability could well be impacted by this. It will probably affect those clients on lower incomes first, as their net disposable income will be affected more than those on high salaries. There is already a divide between a client earning £25k per annum and one earning £100k. At the higher income you could expect, with a 15% deposit, 16 lenders that are happy to lend at five times and above. Not one lender would apply the same LTI on the lower salary. Of course, the cost of living increases will affect everybody, but those with higher net incomes will be able to cope with them much better as they have the buffer to absorb the rises.

                        It will be interesting over the coming weeks to see what impact these increases will actually have on the market. Of course, however in most cases, lenders will apply a different calculation behind the scenes so an accurate affordability calculator will become even more important over the coming months, especially for those brokers whose client base is not entirely made up of high earners.


                          Things they are a changing but not for the better

                          Paragon changed its BtL rates two days ago and in a northerly direction, unfortunately they have also amended their rental stress calculators so making affordability in borrowing slightly more difficult. They are not alone in making criteria changes along with introducing increases in borrowing rates.

                          ”The ICR calculation for our 5 year fixed rate products will now be calculated using the amount requested, at either the product charging rate or 4.25% (previously 4%), whichever is highest.

                          All other products will remain at either the product charging rate plus 2% or 5.5%, whichever is highest.”


                            I came across the following article in a Specialist Lending publication and which bears out what is really happening in the market as we speak and as such is perhaps a timely reminder that not withstanding what Master Bailey of the Bank of England says , the truth is out there but for many they choose not to grasp the reality of the prevailing market.

                            The specialist lending market could see “short-term” and “long-term” casualties due to funding volatility, but there is still demand from investors for this kind of business.

                            Speaking on a panel at the British Specialist Lending Senate, Generation Home’s chief commercial officer Graham McClelland (pictured) said there was “demand out there for mortgage paper” and “real interest from investors for mortgages”, especially in the specialist space.

                            “I’m sure that in time that funding will sort itself out, but there may well be short-term, or even long-term casualties,” he said.

                            One recent example in the specialist lending market has been Molo Finance, that had to temporarily suspend its buy-to-let products due to capital market uncertainty. The lender also had to change some existing mortgage offers and postpone certain completion dates.

                            Anth Mooney, chief executive of Vida Homeloans, said: “If non-bank lenders stand still and fail to diversify their funding models, then absolutely, I think there will be some casualties.”

                            Mooney said that for non-bank lenders the next 12 months’ funding costs would rise given the “level of uncertainty in the macroeconomic and political environment.”

                            He added that when setting its funding strategy, the key consideration was, and is, “ensuring certainty” for both customers and intermediary partners so that once a mortgage offer was issued they can have full confidence that it will be honoured.

                            “I can’t stand here with a straight face and say that funding markets will always be open, but what I can promise with 100 per cent certainty is that once a customer has a mortgage offer from us, they will always get their mortgage, because we always pre-fund our offer pipeline,” Mooney noted.

                            McClelland said that timing is very important when it comes to funding, adding that Generation Home had made a forward flow arrangement at the start of the year.

                            He said that the company, which was founded in 2019 and is focused on first-time buyers facing affordability and deposit challenges, has two main funding lines, one from a traditional private warehouse, and a forward flow arrangement that give it “plenty of runway.”

                            “The availability of funding and making sure that you have enough runway to support you when times get tough is always the critical thing. That’s what keeps you awake at night, but there is also an element of luck, particularly as a small lender,” McClelland added.

                            “It feels like we’re through the worst of that pain. We’re working really hard on finding supplemental forms of capital that are not deposit-based but are not necessarily market-linked. So, watch this space.”

                            McClelland continued that savings’ rates are also going up, so deposit-based funding was also more expensive, which he said should mean big lenders start to raise pricing for their products.

                            “Raising retail funding from a standing start is not particularly any cheaper than accessing the wholesale markets. It’s just that over time, it gives you a more stable, broader base, particularly if you’re looking to grow your business to a balance sheet of £5bn to £7bn, and that’s quite important.”

                            Mid-size banks are eyeing the specialist sector

                            Mooney said that big banks are currently “not servicing anything that falls outside of an automated process” and for mainstream lenders “to pivot to a more specialist lender model, which requires face-to-face solutions, open flexible dialogue with brokers and deep human underwriting expertise is really expensive.”

                            He added: “It is clear that some larger and mid-sized banks have aspirations to move into that near prime space, that grey area between specialist and prime, a market that is quite difficult to accurately size or define. But I don’t see the larger players having the appetite or expertise to expand beyond that into more specialist customer segments.”

                            McClelland said that what was happening in the rungs below the biggest banks was interesting, as they might start looking at the specialist space.

                            “If all you’ve got to compete on is price, but you know you’re going to lose, which is what’s been happening, what do they do? What do the bigger building societies do? And where did they go next?

                            “I think that’s quite interesting to see whether they can do it quick enough to keep up with the more nimble specialists,” he noted.
                            Rising swap rates will lead to price correction

                            McClelland added that previously if swap rates, which are integral to lender product pricing, had gone up by five basis points in a week that would be a “big deal”, whereas now they have continued to go up and up.

                            “I think this might be the first time in mortgage market history, certainly within decades, that the average the average product rate for a 75 per cent loan to value (LTV) mortgage was sub-swap rate. That means the big banks are out there lending money at a cheaper rate than it cost them to borrow in the market and this cannot be the most efficient use of their capital.”

                            He added that this was aided by having a “huge sticky base of customers that cost them next to nothing.”

                            Mooney predicts that mortgage pricing will continue to rise in the coming months, and that Vida has repriced some of its products due to increased funding costs.

                            “Some of the rates being offered in the market are unsustainable and we should expect to see a correction in both buy to let and residential mortgage pricing in the weeks ahead,” he said.

                            He added that forward swap rates were up by around 100 basis points since the start of the year, the prime market has responded with price increases of up to 70 to 80 basis points, whilst the specialist market has been slower to respond, with rates increasing by only 20 to 30 basis points so far.

                            Mooney continued that with ongoing talk of recession, there will also be discussions had across all mortgage lenders about credit risk appetite and the availability of mortgage credit, especially at higher LTVs.

                            “The current dislocation between forward swap rates and bank base rate is driven primarily by uncertainty. It’s uncertainty that kills markets and that uncertainty will therefore drive into a lenders appetite for risk,” he added.


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