EPCs have shifted from being a useful reference document to a key regulatory mechanism. In April 2018, Minimum Energy Efficiency Standards (MEES) were introduced, outlining that any rented property would require a minimum EPC rating of E. In 2020, the Government consulted on raising this minimum to C. Those proposals were initially scrapped, then revived under the current Labour government. The January 2026 Warm Homes Plan confirmed a deadline of 1st October 2030 for all privately rented properties in England and Wales to achieve a C rating.
The Scottish Government have also proposed that Private Rental Sector (PRS) homes will need to meet band C from 2028 for new tenancies and 2033 for all lets. Whilst there is no minimum EPC requirement for Northern Ireland, it’s likely to follow suit with the rest of the UK, particularly if the government want to meet their net-zero carbon emissions targets by 2050.
These requirements add pressure to an already strained rental sector - and they carry direct consequences for lenders.
From a lender’s perspective, any properties that fail to meet the updated EPC requirements become a loan risk.
Rental income vulnerability: Non-compliant properties may become illegal to let, removing income used to service loans.
Property value risk: Sale prices may come under pressure, with sub-D EPC homes likely to achieve a lower sale price than energy-efficient equivalents.
Elevated LTV levels: If properties are worth less due to low EPC ratings and the property is subsequently repossessed, the lender may recover less than expected.
Properties become harder to let: Higher running costs may deter tenants, which in turn increases the risk of loan defaults from landlords.
For those that do meet the minimum rating, retrofit costs may put landlords under financial strain, and this could increase the chance of landlords defaulting on mortgage payments.
Lenders don’t want non-compliant assets on their books that may become unlettable or lose value, so it’s in the lender’s best interests to create product offerings to encourage landlords to improve their EPC ratings. Lenders are also facing pressure from regulators, investors and the market to support climate change objectives. The PRA’s Climate Change Adaptation Report 2025, for instance, makes clear that regulators expect firms to factor climate risk into lending decisions. Lenders who position themselves as informed advisors on these regulatory shifts build trust with their landlord clients. The buy-to-let landlord with energy-efficient properties will have more attractive, sought-after assets and can charge higher rents.
We carried out an analysis on this and found the average rental yield by EPC rating:
Properties rated B and C obtain the highest rental yield of 5%. Interestingly, A-rated properties are lower at 4.5%, but aside from this anomaly, you can see the rental yield fall as the rating drops, with a whole percentage point difference between B/C and F.
Retrofitting clearly pays dividends in yield terms. This is particularly beneficial for landlords that are planning to keep their portfolio for a long period. Landlords will also increase the chances of retaining good tenants as they will benefit from lower bills.
Some lenders have overhauled their product offering to incentivise landlords to upgrade their properties.
In a Bank of England Staff Working Paper (January 2026), “Product Innovation in the UK Mortgage Market: The Case of Green Mortgages,” the authors found that “From 2018 onwards, lenders begin offering measurable discounts of 7.5 basis points (bps) for mortgages against energy-efficient homes, with these discounts widening substantially by 2022.”
Lenders have used several approaches to incentivise upgrades:
• Discount-based incentives (Green Mortgages) for A-C rated properties
• Enhanced loan-to-value (LTV) offers for high EPC-rated properties
• Lower interest rates on high EPC-rated properties
• Cashback or other rewards once evidence of improvement to an A-C rating during the mortgage term
• Partial fee refunds
• Reduced application fees
According to the Green Finance Institute, the number of green mortgage products and propositions grew from 4 in 2019 to 90+ today.
Lenders should assess landlords’ financing needs and encourage them to check their EPC ratings and renewal dates. They can then plan improvements, budget for upgrades and explore available funding and incentive schemes. Lenders should also encourage landlords to have a fresh assessment because they may be closer to a C rating than they think. Some properties only need minor, low-cost improvements to reach C. Even just adding a hot water cylinder jacket or switching to low-energy LEDs can add 1 or 2 points to their EPC certificate. Lenders can also suggest equity release to fund any necessary upgrades, and provide loans specifically intended to improve a property’s EPC rating.
Several lenders already offer specific EPC-linked incentives:
• The Mortgage Works offers up to 80% LTV for properties rated A-C
• Shawbrook Bank provides a partial refund of the original lender fee paid if the EPC rating is upgraded to A-C during the initial product period
• Coventry for Intermediaries unveiled new products offered at a lower rate for EPC ratings A-C in January 2026
The Government is overhauling the official methodology for assessing the energy performance of homes. The Home Energy Model (HEM) is set to replace the Standard Assessment Procedure (SAP). The goal is to make EPCs more accurate, more reflective of running costs and more useful for buyers, sellers and lenders. This will change ratings of properties overnight.
Replacing the traditional A to G rating, HEM will assess a property across four metrics: energy cost, carbon emissions, energy use intensity and a heating system metric. The latter is particularly significant, as any fossil fuel heating systems, such as gas and oil boilers will score poorly regardless of how insulated the property is.
This is likely to catch many landlords off guard. While many have invested in insulation, double glazing and other fabric improvements to achieve a B or C rating under the current system, those upgrades alone won’t be enough under HEM. Properties relying on fossil fuel heating systems will struggle to achieve a C rating, fundamentally changing what ‘energy efficient’ looks like.
This is expected to come into effect in 2029. EPC certificates will remain valid for ten years from their date of issue, so properties won’t need an immediate reassessment, but when they do, the impact could be significant. For lenders, this represents a critical risk: assets considered compliant today may no longer meet requirements in five to ten years.
The tactical opportunity is clear: properties that achieve a C rating under the current system before 2029 will remain compliant for the full ten-year validity of the EPC. Lenders should be advising landlord clients to act now, before this window closes.
When we analysed the national breakdown of properties with a below C rating, the stats were concerning:
Overall, the UK has over half (54.1%) of PRS properties with a D-G rating. The worst performing country is Northern Ireland at 70.3% of sub-D-rated properties. While the new rules are yet to include Northern Ireland, it’s likely this will change as the UK aligns with net-zero targets. Wales also has a concerning number of properties that fall below C-rated, at 61.4%. Outside of these stats, there are still a further 2.4% of properties without an EPC rating, which could also fall below C.
On a positive note, there has been an improvement in EPC ratings for the PRS when we compare pre-2020 (before the announcement on the rule change) figures with 2026:
UK-wide, we’ve seen the percentage of EPC rating A-C jump up from 38.5% to 45.9%, with English properties seeing the biggest rise.
That’s clear progress, but less than four years remain before the deadline. With 54.1% of PRS properties below EPC rating C across the UK, any landlords that leave it close to the deadline to retrofit will face a scarcity of labour and materials.
According to analysis by Octane Capital, it will cost landlords an estimated £19.9 billion to raise EPC ratings to a minimum rating of C across England. Government schemes exist to offset some of this cost, including the Boiler Upgrade Scheme, Warm Homes: Local Grant, Energy Company Obligation ECO4 and some local initiatives. The maximum spending cap has also been reduced from £15,000 to £10,000 per property, with exemptions available for those landlords who have spent this and still haven’t achieved a rating of C. For portfolio landlords, £10,000 multiplied across 10-15 properties quickly adds up.
What’s telling is that research from Goodlord found that 45% of landlords would only be willing to spend £2,000 per property. Landlord income and profits are already low, according to research from Savills (Q2 2025 Lettings Spotlight, drawing on 2022-23 HMRC data). They found that the average private individual landlord reported a gross income of £17,665, which equates to £9,021 profit. With over 50% of landlords reporting gross income of less than £10k, even the capped amount of required spend on properties is a significant blow to finances.
Rightmove also reported that it is not feasible for just under 1.7 million homes to achieve a rating above D. Heritage or listed properties may never reach EPC C. With around a third of rental properties built before 1919, such properties will struggle to meet the standard. Many of these properties face insufficient insulation, single-glazed windows and boilers that don’t meet current requirements.
We analysed EPC ratings based on the age of the property between 1995 and 2026:
Only 1.9% of properties built after 2020 are rated D or below. For those between 2010 and 2020, this was 3.4%, rising to 19.7% for those built between 2000 and 2010 and a significant 47.4% for those between 1995 and 2000. The results are clear and unsurprising — landlords with older properties are going to be hit the hardest.
All the costs incurred to carry out retrofits will likely be passed on to the tenants. With renters already facing an affordability crisis, this puts more pressure on an already-strained rental market. The average UK rent is currently £1,460pcm, eating hugely into the average median monthly pay of £2,586 (source: ONS). Those landlords that do not pass on the costs to tenants may see the rental market as more hassle than it’s worth, reaping little reward. This may cause further landlords to leave the sector. Tenants are then faced with fewer housing options, driving rental prices up further.
Some landlords may also approach this reform as a simple tick box exercise, opting for whatever the cheapest solution is, rather than what’s in the best interests of the tenants living in the property and the long-term stability of the home. There’s also a danger that this will become a last-minute scramble. As the issue has already been kicked down the road repeatedly, some landlords may hope for further delays and postpone taking action.
Landlords who fail to comply in a timely manner may face difficulty refinancing when future regulations tighten and options shrink over time. There’s also the risk that government grant schemes may be withdrawn or funding exhausted before all landlords can access them.
All this retrofitting is also unsettling for the sitting tenant. Whilst beneficial to them in terms of lower energy bills and, hopefully, a better fitted out property, they have to live amongst the chaos whilst these energy improvements are made.
Landlords will be faced with fines if they don’t comply in time, which could affect their ability to pay their mortgage. Tenants are also factoring in energy efficiency into their decision-making to reduce their utility bills, so landlords with low energy-efficient homes may struggle to let their properties.
On the issue of scarcity of labour, it’s worth noting that every social housing property must have an EPC C rating by 2030, too. According to the government, around 26% of social rented homes currently have an EPC below C. That means more than a quarter of these properties will need improvements. This will significantly stretch resources, and private landlords will struggle to find trades to carry out the works if they don’t act soon. The National Residential Landlords Association has warned that the UK is facing a predicted shortage of quarter of a million skilled tradespeople by 2030.
EPC regulation is now embedded in property finance. Lenders are factoring energy efficiency into risk models, pricing, and LTV decisions - and regulators expect them to. The Bank of England’s PRA has made clear that climate risk belongs in lending decisions, and the new Home Energy Model (arriving in October 2029) means that even properties rated C today may not hold that rating under the new methodology. For lenders, the risk isn’t just non-compliance at the 2030 deadline - it’s the longer tail of properties that slip below standard when EPCs are reassessed. The window to lock in a C rating under the current, more forgiving system closes in 2029. Lenders who are advising their landlord clients to act now are protecting both the borrower and their own books.