Your guide to green mortgages

If you thought making your home more energy efficient would simply save on your household bills and make your property more appealing to buyers, think again. Going green could also get you a better interest rate on your mortgage and/or cashback.

The purpose of so-called ‘green mortgages’ is to incentivise homeowners to buy greener properties or make improvements to their home that will benefit the environment when it comes to remortgaging.

With UK residential properties producing more than 20% of the county’s total CO2 emissions, the idea was published as part of the Government’s net zero strategy in October 2021. In November last year, a huge 94% of brokers had never sold a green mortgage, but now several mainstream lenders have such products part of their core portfolio.

How does a property qualify for a green mortgage? 

While each lender will have its own criteria, generally speaking, a property for sale will need to have an EPC rating of A or B to qualify for a green mortgage. Alternatively, it should have had its energy efficiency improved by upgrades such as extra insulation or double/triple glazed windows.

In return, borrowers will gain access to discounted interest rates or other incentives, such as cashback or favourable bridging loans where the money can be put towards eco improvements.

What kind of green mortgages are there? 

Big names including Nationwide, Barclays and NatWest are all offering green mortgages. Depending on the lender, you may only be able to access these products when buying a new-build, while others will allow borrowing on older property stock.

Perhaps more interesting, however, is that some mortgage lenders are offering benefits on additional borrowing or an advance on your current mortgage to carry out green home improvements. These usually work as additional loans that run alongside your main mortgage but on a different – usually lower - interest rate and for a different term, making energy saving improvements cheaper to fund.

Is it worth it? 

Right now, preferential discounts range from a measly 0.01% to 0.5%, with cashback up to £1,000, so it’s still more likely that you’ll get a better deal on a standard, mainstream mortgage.

However, as of February 2022, there were 127 more green buy-to-let mortgage products available than in November 2021, representing 15% of the landlord market and this figure is likely to have grown since. Our advice is to keep an eye on the market and take independent financial advice to suit your personal circumstances, as more green mortgages will definitely emerge for all borrowers.

Mortgages aside, the benefits to buying a green home or improving the energy efficiency of your current home are not to be sniffed at.  If you’re thinking of moving home soon and want to make buying green a priority, give the White & Brooks team a call. We can take you through our properties for sale with the best EPC ratings, including some stunning new build homes.