May 16, 2023
As we all become far more attuned to the dangers our planet faces because of climate change, being planet-friendly in all our choices – including what we do with our money – has become important to so many people.
As a result of the Greta Thunberg effect, people now have the option to invest their money into more eco-friendly pots such as green savings, green pensions and now, green mortgages.
What is a green mortgage?
A green mortgage is a type of mortgage designed specifically for energy-efficient homes. These homes are either newly built with high energy efficiency ratings in mind (usually of 81 or above or falling within energy ratings bands A and B), or homes where the owners have made sizeable energy-saving improvements. This could include putting on solar panels, improving insulation, adding triple glazing, and installing new, efficient boilers.
Any houses that meet these criteria are eligible to be considered for a green mortgage. Homeowners can be rewarded for their energy efficiency by their lender in a few different ways, such as better interest rates or cashback on their mortgage. Of course, not only do these homeowners enjoy potentially lower mortgage costs they may also benefit from lower energy bills every month, resulting in more disposable income and savings opportunities.
It’s also worth noting that those properties qualifying for a green mortgage may experience a potential increase in property value over time. As the war on climate change continues, it’s possible that greener properties are, and will continue to be, seen as a more attractive investment.
How do I apply for a green mortgage?
The actual mortgage application process for a green mortgage is nearly exactly the same as a mainstream mortgage. A mortgage lender will assess your affordability in the same way and request the same identification documents. However, the application process for a green mortgage will include additional steps, such as an energy assessment of the property to determine its energy efficiency rating.
Who offers green mortgages?
It’s a common misconception that only small lenders and building societies operate in the green mortgage market. In fact, major lenders such as Barclays, Nationwide, and NatWest all have green mortgage products. The difference between them is the incentives they offer.
Barclays, for example, offers the Green Home Mortgage for borrowers purchasing a new-build home with an energy efficiency rating of 81 or higher. Nationwide provides a Green Additional Borrowing product for existing mortgage customers who wish to borrow more for energy-efficient home improvements. NatWest offers the Green Mortgage, which rewards eligible customers with a lower interest rate when purchasing a property with a high energy efficiency rating. If you’re interested in a green mortgage, make sure to shop around to see what works best for you.
How much cheaper could my mortgage be if it was green?
The reality is that right now, green mortgage rates aren’t lower than normal residential rates and there’s some way to go before they are really challenging mainstream rates.
But don’t be disheartened, this doesn’t take away from the fact that in an energy-efficient house, utility bills will be lower. This should be factored into the overall cost of your mortgage and running your home. Also, as we said earlier, green properties may also increase in value more than a traditional property over time.
As for the future of green mortgages, it’s likely that they will continue to grow in popularity as the focus on sustainable living and environmental responsibility increases. We may see more lenders offering green mortgage products, as well as additional incentives and benefits for borrowers who choose to invest in energy-efficient homes. The demand for more eco-friendly properties may also rise, leading to more innovative designs, construction methods, and materials to enhance energy performance.
If the demand for energy efficiency and green mortgage continues, we would expect to see the rates of these mortgages become more competitive and start challenging traditional mortgages.
Want to keep up to date with the green mortgage market? Keep in touch with our mortgages team for the latest news.
