What are green mortgages?
With soaring energy prices and ever more focus on the climate change the world faces, it comes as no surprise that ‘Green mortgages’ have sprung to prominence in recent years. Some mainstream lenders are offering ‘Green mortgages’ aimed to incentivise and increase the appeal of buying a ‘Green home’.
They offer potentially lower interest rates or cashback for properties that have certain EPC (Energy performance certificate) ratings. To qualify, the property will need to have an A or B EPC rating or a couple allow Cs.
As well as potentially benefiting from lower interest rates, the customers can hopefully enjoy lower energy costs.
What is the incentive to get a Green Mortgage?
You may have access to slightly cheaper rates, and some lenders offer cash back, typically £250-£500. The mortgage savings aren’t enormous, but in addition to the potential savings on ever-soaring energy bills, it all adds up.
Which mortgage providers offer Green deals?
At the time of writing (20/02/2023), the number of high street lenders offering ‘Green’ deals is relatively small.
Nationwide, TSB, Halifax, Virgin, Natwest and Barclays all currently offer green deals along with some smaller, less well-known building societies.
What is an EPC (Energy Performance Certificate) rating?
An energy performance certificate provides an energy efficiency rating for the property from A-G. A is the most efficient, and G is the least. It’s been a legal requirement since 2008 to have a valid EPC if you are selling or letting a property.
EPC certificates are valid for 10 years. Most new build properties have been built with energy performance considered, and older homes tend to be much less energy efficient.
How can you improve your home’s efficiency rating?
There are several things you can do to improve the EPC rating in your home, some can be done at minimal cost and others can run into the thousands.
Fitting low energy lighting – LED bulbs and a smart meter can be a relatively inexpensive way. Insulating the walls and floors and loft space, replacing your windows, upgrading the boiler, and investing in renewable energy can make a significant difference but will come with a relatively large up-front cost.
What about if your EPC rating is E or above?
Having a property with an EPC rating of E or lower can cause issues with some mortgage providers, particularly Buy-to-let lenders, because it’s a legal requirement that you have a minimum EPC rating of ‘E’ to let a property, however from 2025 it will be changing to ‘C’.
Existing tenancies will have until 2028 to comply with the new rules. Although it’s less of an issue for residential mortgages at present, it’s something on the horizon, and it’s worth addressing sooner rather than later.
Can you get a better mortgage rate depending on your EPC rating?
Yes, although it must be said the savings are not significant, and many mortgage providers have received criticism for effectively ‘Greenwashing’ by labelling cheap mortgage rates ‘Green’.
There is little uptake on Green mortgages at present, perhaps due to a lack of awareness. However, there is pressure for the banks and building societies to do more, so watch this space.
How can Strive help?
If you’re interested in a green mortgage but don’t know where to start, get in touch with one of our advisers at Strive Mortgages today.