Green mortgages

In this episode, we discuss green mortgages and how they can help you make your home a green property. Listen below to find out more.

Hello and welcome to this podcast brought to you by Charles Cameron and Associates. Today we will be discussing Green Mortgages. What is a green mortgage? How can you qualify for one? And are there any drawbacks to having a green mortgage?

You may be familiar with the term, as the number of green mortgage products in the market is vastly increasing. Many lenders in the UK now offer green mortgages. The concept is an incentive for new and existing home-owners to improve the energy efficiency of their home, or to move into a home that already meets a high standard of energy efficiency. With heightened awareness around climate change, an increasing number of buyers are keen to reduce their impact on the planet by ensuring their homes are using less energy.

The UK Government has set themselves a target to reach net zero emmissions by 2050. As part of its plans for this it is looking to reduce emmissions from many sectors including housing. From April 2023, new rules will come into force around energy efficiency for homes, affecting anyone selling or letting a property in England and Wales. A property’s energy efficiency is calculated from A – most efficient to G – least efficient. This rating is then shown in an energy performance certificate or EPC, Owners must obtain an EPC whenever a property is sold, let or built.

Earlier this year, the government launched new support of up to £20 million for mortgage lenders, to help the finance industry create additional green mortgage products with the aim to provide homeowners with cost effective solutions to going green and to help them to spend less on their energy needs. Ministers are focused on ensuring a significantly increased number of homes are rated C and above for their Energy Performance.

So, what is a green mortgage?

The aim of a green mortgage is to primarily encourage homebuyers to own an energy efficient property. An individual with a green mortgage on an energy-efficient home will receive a reward from their lender, which could be a better interest rate, or in the form of cashback.

As well as a lower monthly repayment or cashback, green mortgagees could also save more on  energy bills each month, as green buildings typically cost less to run. As the focus on green mortgages has increased in recent years, there’s now a better variety of high-street banks offering their own green mortgage products.

What types of green mortgage are there and how to qualify for one?

There are two main types of green mortgage:

• Mortgages that offer lower interest rates or cashback to buyers who purchase an energy efficient home

If the property you’re buying or already living in has an EPC rating of A or B, by choosing a green mortgage, you could receive a better interest rate on your mortgage or receive a reward in the form of cashback.

• Mortgages that offer lower interest rates or cashback to buyers who make green home improvements

Under this type of green mortgage, you’ll be rewarded for undertaking energy-efficient home improvements; such as installing solar panels, installing insulation, or upgrading your heating system.

Which lenders offer green mortgages?

With the lens on combating climate change more focused than ever before, green properties are seen as safer purchases in the eyes of lenders as they are more likely to maintain their value.

Lenders (including Natwest, Barclays and Halifax) are offering a variety of different green mortgage products.

Natwest have a green mortgage product that offers a reduced mortgage rate on a 2- or 5-year fixed rate mortgage. This is eligible to buyers’ purchasing or remortgaging an energy efficient home with an EPC of A or B [2].

Barclays offer a range of green mortgage products including a Green Buy-to-Let Mortgage which offers lower mortgage rates to buyers of an eco-friendly property. They also offer a Green Home Mortgage for buyers of a new-build property who have bought directly from the builder [3].

Halifax offer green mortgage products that reward home owners who carry out home improvements. Their Green Living Reward offers home owners £1,000 towards a heat pump to have fitted in their home, plus an additional sum with a government grant. Another incentive Halifax offer is the ability for home owners to claim £500 for home improvements including windows and insulation [4].

Drawbacks of a green mortgage

It’s important to keep in mind that green mortgages aren’t always the cheapest mortgage option. With recent mortgage market uncertainty, some green mortgages have become more expensive. When comparing a green mortgage deal to a non-green mortgage deal from the same lender, it’s possible a green mortgage will save you money, but you should always check with an independent adviser that a different lender isn’t offering a more suitable product for you and your circumstances that you would qualify for, whether it is a green mortgage or not.

If you’re interested in Green Mortgages, our professional, friendly advisers are on hand to support you and can help you explore all of your options.

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