An introduction to green mortgages
Green mortgages might not always be the right choice for everyone – but they could make financial and ethical sense for customers who are taking active steps to run environmentally friendly homes.
Read on to learn more about how these innovative products are helping homeowners save cash, reduce waste, and support a greener, cleaner way of living.
What is a green mortgage?
A green mortgage is a type of mortgage product that offers lower interest rates or higher borrowing limits to customers who are either:
- Buying a demonstrably eco-friendly building, or
- Carrying out renovations on a property to improve its energy efficiency rating.
You do not need to be a first-time buyer to qualify for a green mortgage. You do, however, need to be purchasing the property to live in. Green mortgages are not currently available on Buy to Let purchases.
Green mortgages on new builds
It’s much more common for homeowners to take out a green mortgage on a new build property.
Most recent developments are supplied with an energy efficiency rating of B or above, as per their Energy Performance Certificate (EPC), on completion. If you are buying an off-plan property, your developer should be able to provide you with a Predicted Energy Assessment (PEA), which can be submitted to your preferred lender as part of the mortgage application process.
Green mortgages on older properties
Thanks to the work of the government’s Green Finance Taskforce which advocates the move towards cleaner, greener growth in the mortgage market; some lenders are now willing to offer similarly eco-driven deals to homeowners who carry out improvements that will reduce their energy consumption and lessen their impact on the environment.
This is a particularly important move given that residential housing in the UK is the third biggest contributor to CO2 emissions, and it’s thought that up to two thirds of our domestic properties are achieving an EPC grade of C or below.
It is possible in some circumstances to secure a green mortgage on an older property, if you can demonstrate exactly how you’re going to ensure it meets the appropriate eco standards. For those looking to undertake a low carbon retrofitting strategy, you might choose to:
- Installing a better, more eco-efficient boiler
- Insulating the your loft and/or cavity walls to minimise heat loss
- Fitting new double or triple glazed windows and doors with argon gas-filled glass
- Installing solar panels
- Installiing a more sophisticated water drainage system
- Putting in composting toilets
- Adding an electric vehicle charging point
- Upgrading to LED lighting
- Investing in a range of eco-friendly accessories, including water saving showerheads, eco kettles, and stick-on insulating seals
- Using construction materials that generate less waste
As well as significantly improving your home’s green credentials, these kinds of energy performance improvements will help to cut your fuel bills and ensure your home is a warm, comfortable place to live.
Could you get a green mortgage?
As you would expect, mortgage providers work to stricter lending criteria for green products.
If you are interested in a green mortgage, you will need demonstrate to your lender that the property in question already has a sufficient energy efficiency rating. This will be much easier if you are buying a new build, as the EPC or PEA will be supplied prior to your purchase or the build itself.
If you want to take out a green mortgage on an older property with an EPC rating of 80 or less, you must prove that this figure will be within the acceptable range after all your planned works have been completed.
And, of course, you will need to meet the standard affordability criteria for the loan.
Which lenders are offering green mortgage loans?
Many mortgage providers are already taking a stronger eco stance by offering extra incentives to customers taking on environmentally friendlier properties. Here are just a few examples of the green residential deals that are currently available from some of the UK’s best-known lenders
At time of writing, NatWest is providing discounted 2 or 5 year fixed rates and cashback options on its green-labelled mortgages for residential borrowers with a maximum loan-to-value (LTV) ratio of 85%.
Barclays is another High Street bank that has wasted no time in jumping on the green trend. Its Green Home Mortgage is available to eligible customers who are purchasing a property from one of its partner house builders; the list includes well-known developers Barratt Homes, Countryside Properties, Crest Nicholson and Taylor Wimpey.
Other lenders are listing an array of green residential mortgage and green lifetime mortgage products. Please contact our team for more information or to discuss your options.
In addition to these, there are a number of other lenders that offer various types of green residential and lifetime mortgage products, with more becoming available as time goes on. Please contact our team for more information on green home mortgages or to discuss your options.
What’s in store for the green mortgage industry?
As a financial services provider that is wholly committed to reducing its carbon footprint, Bower is supportive of any scheme that seeks to have a meaningful impact on climate change.
We are confident that this is just the beginning for green mortgages. With the EU keen to achieve net carbon neutrality by 2050; the UK’s Green Homes Grant scheme providing attractive incentives to nationwide homeowners; and the government launching a £5 million fund within its Green Finance Strategy to specifically assist with the development of green mortgage products, we anticipate that many more lenders will expand their eco-friendly product offering in the years to come.
Go green with Bower
For more information on the range of green mortgages available in the wider market, or to see if you may be eligible for one of these innovative residential mortgage deals, contact our expert green mortgage advisers today.
Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. Some buy to let mortgages are not regulated by the Financial Conduct Authority.
Bower Mortgages provides impartial whole of market advice with an award winning customer service experience. There will be a fee for mortgage advice. The precise amount will depend upon your circumstances but a typical fee will be £595 on completion of the mortgage.
Bower Mortgages is a trading style of Bower Retirement Limited and is Authorised and Regulated by the Financial Conduct Authority. Financial Services Register Number: 451607
Speak to one of our dedicated customer specialists or arrange your free, initial no-obligation quote by calling us on freephone 0800 411 8668.