Why use green mortgage?

It’s no secret that we’re facing a climate crisis. With homes accounting for more than a fifth of the UK’s total CO2 emissions*, a green mortgage is one way to take a step in the right direction for the planet.

Green mortgages reward you for buying or owning an energy-efficient home. That could mean buying an eco-friendly home, or making energy-saving improvements to your current home. They’re also known as ‘eco-mortgages’.

What are the rewards?

Some lenders give you lower interest rates and larger loans when you buy an eco- home – usually these are new builds designed to be super energy efficient.

Other lenders may give you lower interest rates, cashback or larger loans when you make energy-saving improvements to your current home.

Why do lenders offer them?

Lending is all about risk. Lenders offer lower rates for more energy efficient homes because they think lending on green buildings is less risky. There are two reasons for this:

They cost less to run: the greener your home, the lower your utility bills. In the eyes of the lender this means your disposable income will be higher and so the mortgage affordability improves.
They may be more valuable over time: green buildings are more eco-friendly and as more attention is spent looking at global warming they are becoming more popular. In addition they may be seen as a more attractive offering compared to property with no green features and are expected to hold value more robustly, even if the property market dips.

A green home is one that’s energy efficient – it uses less energy to run, and it doesn’t waste the energy it uses.

Lenders generally offer green mortgages on homes with an EPC rating of A or B. EPC or ‘energy performance certificates’ are needed whenever a property is built, sold or rented. These certificates give a building an energy efficiency rating from A, being the most efficient to G, being the least efficient.

New builds are more likely to be eligible because they’re built with energy efficiency in mind and will have an EPC rating, whereas older housing stock will not have one unless the property has recently been sold or let out. In 2019, government research stated that about 15 million homes in England – that’s 60% of the total number – were below an EPC band C.*

How we can help

When you’re ready to get a mortgage, our team of impartial experts can help you think through the choice of whether to compare any green mortgage deal to other mortgages from across the whole market.

Source: *Department for Business, Energy & Industrial Strategy, 2020 UK greenhouse gas emissions, provisional figures