You may have heard recently of green mortgages – home loans which offer people rewards for buying energy-efficient properties or for making significant energy-saving improvements to their homes.
Most green mortgages apply to new builds, but some lenders offer incentives to homeowners for retrofitting green measures to their existing homes.
Could you qualify for a green mortgage?
UK lenders will all have their own criteria and maximum loan-to-value ratios for green mortgages, but it seems that the minimum level of energy efficiency needed to qualify is broadly similar:
- Barclays offers lower mortgage rates for new build, primary residence properties with energy efficiency ratings of at least 81 or an Energy Performance Certificate (EPC) in band A or B
- NatWest offers lower interest rates on properties with an EPC of A or B and offers these rates to people remortgaging as well as buying, as log as the LTV is 85% or lower
- Nationwide Building Society offers £250 cashback to people buying properties with efficiency ratings of 86 or over, with the incentive rising to £500 for properties scoring 92-plus
- The Ecology Building Society offers a discounted mortgage rate based on energy-efficient improvements and this applies to conversions, self builds and renovations as well as new builds
This is a handful of examples, but the pattern is clear; buy a new build with a good EPC or improve your home before you remortgage and you could see some real savings.
Are green mortgages new?
They’re newish, with Barclays launching the first residential green home loan in 2018. They’re growing in number and popularity in the last five years, with both banks and building societies offering green mortgages to homeowners who improve their energy efficiency.
What are the benefits?
The main advantage of a green home loan is that it’ll save you money. You’ll either get a reduced rate on your mortgage or you’ll get cashback. Then there’s the savings you’ll make from the improvements themselves, as well as the benefits to the environment and knowing that you’re contributing towards the UK’s Net Zero 2050 target.
What sort of interest rates to green mortgages have?
The interest rates on home loans are always changing and so it’s hard to give an exact answer, but for most green mortgages, the rate will be lower than a similar product on a not-so-efficient property. Of course, you might prefer a product which offers cashback instead of a lower rate. Whichever product you choose, however, make sure you’ve looked at as many options as you can before reaching your decision.
