Rising energy costs are putting the pinch on households across the country. Average prices rose by 27% in October 2022 and are set to increase a further 20% in April 2023 when the government’s energy price guarantee (which places a limit on the price households pay for their energy) rises to £3,000 (from £2,500) for a typical household.

This is a particular concern for those on fixed incomes such as homeowners at retirement age who are receiving a pension. In addition, upcoming changes to legislation will require landlords to upgrade their stock to EPC C or above at a time when their profits are being squeezed as rising interest rates and tax changes continue to bite.

Coupled with a growing ethical desire among homeowners and landlords to reduce their carbon footprint, these pressures are resulting in more people exploring how energy efficiency upgrades – made either by releasing equity in their homes via a lifetime mortgage or leveraging capital through their property portfolio – could save them money in the long run. We believe this interest will only intensify over the coming months. Here are three reasons why:

• 1. Opportunity to increase property value

Last year, the government restated its ambition to upgrade the EPC (energy efficiency) rating on all properties to C or above by 2035 in its Net Zero Strategy. Growing numbers of homeowners are considering upgrades in their properties to save on energy bills while future-proofing their homes.

It’s a tall challenge. ONS figures suggesting only a quarter of households are currently considering making energy efficiency improvements (with nearly 40% putting their hesitation down to cost). But Knight Frank research estimates that improving the EPC of a property, such as boosting insulation or adding solar PVs to the roof, could increase a property’s value by up to 20%.

Analysis found that homes which had moved from a D to a C rating added an additional 3% to their value over and above local house price growth, equivalent to £9,003 based on the average resale value. Homes moving two bands from an E to C saw an average price uplift of 8.8% (£29,289), and from F/G an additional 19.6% (£64,444).

Though the value uplift will need to be considered against the required upfront investment to improve it, it’s something that has appeal to both homeowners and landlords by having the potential to maximise the sell on value and a landlord’s portfolio value.

• 2. Greater certainty on future energy costs

A recent case study with one Knight Frank Finance client showed how energy efficiency upgrades made to their Grade II listed property worth £950,000 would deliver real cost savings.

The client is of retirement age and has seen their energy bills rise to £840 per month. With an EPC rating of E, they opted to take out a lifetime mortgage for £50,000 to carry out a series of green upgrades, including: insulation; heat pump; solar panels; and double-glazed windows.

Together these improvements increased the EPC rating on the property to C or better, resulting in a projected future energy cost of £420 per month. With potential savings of over £5,000, these improvements could pay for themselves in 10 years. The benefits of this example extend beyond the equity release market, with lower energy bills clearly an attractive prospect for existing and prospective tenants in the buy-to-let space.

• 3. Regulatory need within the buy-to-let sector

In a bid to raise the energy efficiency standard of the UK’s rental stock, the government is bringing in legislation in April 2025 that will require buy-to-let properties to have an EPC rating of C or above for all new tenancies (they currently have to meet EPC E or above).

The upcoming changes are already prompting many landlords to consider upgrades to their properties, with specialist buy-to-let lenders like Paragon seeing a 44% increase in lending for ‘green’ purposes, compared with last year.

Costs for upgrading a house from EPC D to C start from an average of around £6,155, and from £3,100 for a flat, but for landlords to get a good understanding of costs they will need to get their property inspected by an energy assessor.

An assessor will be able to inspect properties before landlords remortgage to help gauge what upgrades need to be carried out to get their homes up to EPC C standard. It’s recommended this is done as soon as possible, so any funds that need to be accessed from equity in a buy-to-let property can be considered at the point of remortgage.

We recommend that landlords speak to an energy assessor, who will inspect their property portfolio to help gauge what upgrades are needed to achieve a minimum EPC C. It’s wise to do this as soon as possible, so any funds that need to be accessed from the equity in a buy-to-let property can be considered at the point of a remortgage, and before a new tenancy is agreed.

Want to discuss how you could benefit financially from green home upgrades? Contact us, mortgages@knightfrankfinance.com