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.
What is the criteria to be accepted for a green mortgage?
Depending on whether it is for the purchase of a new build or the purchase or remortgage of an older property with aims of improving its energy efficiency, the eligibility criteria for green mortgages tend to vary between lenders but typically will require some of the following;
- An EPC (Energy Performance Certificate) with a rating of 81 or above which is energy bands A or B.
- The property you are buying is to live in and not to be used as a buy to let.
- That you are buying a new-build property directly from the builder or developer.
- That the property is going to be retrofitted with energy efficient changes to improve its EPC rating.
Your professional mortgage broker will be able to help guide you through the eligibility criteria to determine which path is best for your individual circumstances.
Which lenders offer a green mortgage?
There are now a growing number of both high street brands and specialist lenders who are offering green mortgages covering a range of products, from those suited for purchases of new builds to retrofit mortgages designed for those looking to improve the energy rating of their homes.
Currently Barclays and NatWest are amongst the better known lenders of green mortgages but there are many others available all offering a range of different deals and benefits. To find out which lender can offer you the best deal for your personal circumstances then be sure to seek professional advice from a qualified mortgage specialist.
What is a green mortgage?
With environmental awareness more prevalent than ever, green mortgages are becoming increasingly popular. Under this type of mortgage, a lender or bank can offer buyers or homeowners preferential terms for demonstrating that the property meets the required environmental standards.
This is mostly relevant for new build properties with a sustainability rating in place, but can also be applied to existing homes that are being renovated to improve their environmental performance.
When it comes to the benefits of why a home buyer would choose a green mortgage, aside from the many social and financial advantages of running an eco-friendly home, some of the mortgage deals available can include incentives such as lower interest rates or increased loan amounts.
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.