Since publishing its Clean Growth Strategy in 2017, the government has been encouraging mortgage lenders to develop green mortgage products. The idea was to develop cheaper mortgages which take account of the lower lending risk associated with more energy-efficient properties. Lenders offering green mortgages offer preferential terms if you buy an energy efficient home, or commit to improving the efficiency of their current home.
How do I get a green mortgage?
The eligibility varies from lender to lender, but the EPC (Energy Performance Certificate) is typically a key factor and must be provided. This tells you how efficient a building is and gives the property between 0 and 100 points, equating to a rating between A (highest) and G (lowest). Scores of 81 or more qualify for an A or B rating.
The EPC provides how much the property costs to heat and light, and what its carbon dioxide emissions are estimated to be.
Other documentation required when applying for a green mortgage varies. Some lenders offer green mortgages for:
- Funding energy efficient improvements (Nationwide and Saffron Building Society)
- Buying new homes (Barclays)
- Equity release (Just Group)
- Self-builders and renovators (Ecology Building Society)
Who is offering Green Mortgages?
Nationwide focuses on improving efficiency of existing homes with its Green Additional Borrowing product. This is only available to existing Nationwide mortgage customers, and offers rate reductions of up to 0.69 per cent on existing two and five-year fixed further advance rates.
At least half of the money must be used to fund a range of sustainable enhancements, from boiler upgrades and solar panels, to electric vehicle charging stations and traditional insulation.
Saffron Building Society
Saffron Building Society’s mortgage focuses on making energy efficient improvements to older properties too, aiming for the best EPC ratings. It’s a standard residential mortgage with an added reward for borrowers who improve the energy efficiency of their home.
If a customer improves their EPC rating (must be a minimum of Band E) in the first 6 months of their mortgage, Saffron applies a 0.10 per cent rate reduction for the remainder of the fixed rate period.
Barclays’ Green Home Mortgage is for buyers purchasing an energy efficient new build property from one of the bank’s partner housebuilders. These include Bloor Homes, Countryside Properties, Taylor Wimpey, Barratt, Bovis and Persimmon.
Housebuilders provide a Predicted Energy Assessment before a home is built. This document allows for a green mortgage, as long as the property is predicted to have an EPC rating of A or B.
Older homeowners looking to release equity should look at Just Group’s green lifetime mortgage which launched in July 2020. It provides discounted interest rates to lifetime mortgage customers whose property has an EPC rating of A or B.
Qualifying customers receive a 10 basis points discount on their mortgage rate and a £50 contribution to the cost of the EPC.
Ecology Building Society
Ecology Building Society offers an energy improvements mortgage suitable for self-builders, and borrowers carrying out renovations or conversions. It enables borrowers to save up to 1.5 per cent off their mortgage rate by improving the energy of their home. Qualifying improvements include:
- Double or triple glazing
- Efficient heating systems
- Solar panels
- Wind turbines
- Ground source heat pumps
- Biomass heating
The level of discount applied is based on the EPC rating on the self-build, conversion or renovation when the work is completed. The borrower will need to provide evidence of the property’s EPC and the work done.