Green mortgages: What are they and what are the benefits?

Green mortgages: What are they and what are the benefits?

Green mortgages might feel like a relatively new concept.

However, they’ve actually been around for a number of years – with the very first green mortgage launched back in the early 1980s.

With the UK placing more focus on climate change and energy-efficiency in properties, though, the number of green mortgages available and the coverage they’re getting are increasing.

Here, we’ll explain what green mortgages are, how they work and who is eligible.

We’ll also reveal some of the energy improvements you could make to your home either through a green mortgage, or so you can secure one in the future…


What are green mortgages?

Green mortgages are offered to buyers either as an incentive to buy a more energy-efficient property or to make energy efficiency improvements in their current home.

Most green mortgages see lenders offer a more attractive interest rate, or a form of cashback to buyers.

Green mortgages are part of the UK’s pledge to reach net zero carbon emissions by 2050, with the energy efficiency of property a key part of that quest.

The government hopes all properties in the UK will have an Energy Performance Certificate (EPC) rating of at least ‘C’ by 2035.

It’s hoped green mortgages will either encourage buyers to purchase more energy efficient homes or upgrade their existing properties.


What is a sustainable mortgage?

A ‘sustainable mortgage’ is simply another name for a green mortgage.

Green mortgages are considered to be a sustainable alternative to standard property buying loans.


Can you get a green mortgage on an eco house?

Mortgages for so-called ‘eco houses’ can be harder to come by compared with traditional loans.

That’s because eco properties are often classed as ‘unusual homes’, meaning, in the eyes of the lender, they could be difficult to sell.

This means lenders will sometimes see an eco house as an ‘unsecure’ property for their loan.

Mortgages for eco houses are available, but lenders will often require a larger deposit to lessen their perceived risk.


Who is eligible for a green mortgage?

As well as standard mortgage lending criteria, buyers who want to secure a green mortgage must also meet other stipulations.

Most lenders offering green mortgages on properties to buy will require those properties to have an Energy Performance Certificate (EPC) rating of either A or B.

And those lending funds for homeowners to undertake improvements will usually require a commitment that a minimum percentage of any additional borrowing is spent on energy efficiency work.

Some of the UK’s biggest lenders are offering green mortgages, including:

  • Barclays
  • NatWest
  • Nationwide
  • Halifax
  • Santander


Can I remortgage on to a green mortgage?

It’s possible to remortgage and move to a green mortgage product.

However, you would need to meet the eligibility criteria to do so, meaning your property must have a certain Energy Performance Certificate (EPC) rating, or you would need to commit to certain energy improvements to bring it up to standard.


Types of green mortgage

There are three main types of green mortgage:

Lower interest rate mortgages for properties with high energy efficiency ratings

Capital release mortgages for energy efficiency improvements

Additional borrowing to make energy efficiency improvements


The benefits of green mortgages

Green mortgages come with a wide range of benefits – for buyers, lenders, and the planet.

  • A lower mortgage interest rate, meaning cheaper repayments
  • Lower energy bills
  • A higher-value property
  • Increased mortgage borrowing potential through less household spending on utility bills
  • A reduced carbon footprint


Energy efficiency improvements you could make with a green mortgage

There are a whole host of steps you can take to improve your property’s energy efficiency through a green mortgage, including:



1. Installing solar panels

Solar energy uses the heat of the sun to create electricity.

As well as reducing your carbon footprint, solar panels can save you huge amounts on your annual electricity bill – sometimes up to £500.


2. Roof, loft, or cavity wall insulation

Up to a quarter of heat is lost through the roof in uninsulated homes.

In a detached house, it’s estimated loft insulation alone saves more than £300 per year.

Cavity wall insulation is also a great way to keep heat in and can also help to save around £300 from an annual energy bill.


3. Upgrading your boiler

An energy efficient boiler could save you up to £135 per year in a detached house.

So, if your boiler is feeling its age, a new condensing unit could be a great option.


4. Energy efficient doors and windows

Modern double-glazed windows are superb at keeping heat in your property and reducing both your bills and your carbon emissions.

Modern composite doors, too, are built with energy efficiency in mind, while retaining the look and feel of a wooden door.


5. Fitting a ground source or air source heat pump

The government’s heat and buildings strategy sets out a timeline for the removal of domestic boilers from UK homes, which will be replaced by air source or ground source heat pumps.

The pumps use heat from the earth or air and transfer it into heated water through radiators.


Further reading…