What is a green mortgage?
Green mortgages in the UK are mortgage deals for those who buy an energy-efficient property. They’re also available for homeowners who renovate with the purpose of making their home greener. There are now 26 green mortgages on the market, which are mostly available on new-build properties.How do green mortgages work?
Green mortgages are an incentive for borrowers to buy an energy-efficient property or renovate their existing home to improve the EPC rating. There are three main types of green mortgage:- Mortgage deals that offer a lower rate for individuals buying green properties.
- Standard mortgages that offer cashback when purchasing an energy-efficient home
- Mortgages that provide discounted rates or cashback upon the homeowner making green renovations.
Green mortgage rates
In the campaign to become a green mortgage company, several high-street banks offer cheaper rates to people buying energy-efficient homes. One lender is making their green home mortgage deal available on new-builds with EPC ratings of A or B. Buyers can borrow at up to 75% loan-to-value. Another green mortgage company is providing a deal for new-build or existing homes with EPC ratings of A or B, available up to 85% loan-to-value and comes with £250 cashback.How could net zero affect mortgage borrowing in the UK?
In a bid to tackle emissions, it’s very likely that green mortgages will become more mainstream in the next few years. To meet its emissions target by 2050, The Climate Change Committee states that the government should ensure all homes have an EPC rating of at least C by 2028. Research has also found that 57% of lenders plan to launch a green mortgage option after the pandemic. However, green mortgages are still relatively niche, and in order for them to have a positive impact, they need to come with bigger savings and benefits to incentivise more buyers.Could having a green home make it cheaper to borrow?
At the moment, owning an energy-efficient home usually means a small saving in terms of rate, allowing you to benefit from discounted mortgage repayments. It’s worth looking at green mortgages as an option, but be open to searching elsewhere for a better rate on a standard mortgage product. This isn’t to say that green mortgages won’t make it cheaper to borrow in the future. As more lenders plan to back the green movement, eco-friendly mortgage deals will inevitably become more competitive.What is an EPC rating and how can I improve it?
If you’d like to access green mortgage deals that offer discounts for green home renovations, you’ll need to take some steps to improve your property’s EPC rating. An EPC rating is a review of a property’s energy efficiency. The survey is carried out by assessors before producing the EPC, which is then placed on a colour-coded scale from A to G, with A being the most efficient and having the cheapest energy bills. Here’s some easy ways you can improve your property’s EPC:- Insulate the walls and roof
- Switch to LED light bulbs
- Install a smart meter
- Look at getting double or triple glazed windows
- Upgrade your boiler
