Over the past year or so, you may have noticed more and more lenders offering Green Mortgages. Mortgage Advice Bureau Relationship Manager Pauline McGill discusses the benefits a Green Mortgage can bring …
So what is a Green Mortgage and how would you qualify?
A limited number of UK banks and building societies are offering enhanced mortgage deals e.g. lower interest rates, cashback, or both, if a home qualifies as eco–efficient under their terms and conditions.
How to Qualify
How homes qualify is usually determined by the EPC, the Energy Performance Certificate, which was introduced in 2007. Every home which is being sold or is newly built must have an EPC inspection which measures its energy efficiency on a scale of A to G. Assessors will consider such things as how thick the loft insulation is, whether the boiler is working efficiently and so on. Each individual lender’s criteria will differ, but most Green Mortgage lenders will be looking for an EPC rating of A or B or the equivalent. Some lenders are only offering their Green Mortgages to new build properties, but not all.
Some lenders are supporting additional borrowing if it is to be used on green projects. For example, Nationwide will offer lower interest rates if the customers are using at least 50% of the additional borrowing on energy efficient home improvements.
In the new build market, new homes will have a Predicted Energy Assessment, or PEA, before they are finished which is what the lender would use in this instance.
Which lenders are offering Green Mortgages?
The list is not yet extensive but includes Barclays, NatWest, Nationwide, Virgin Money and Kensington. Their deals vary. For example, Nationwide will offer an automatic payment of £250 if you buy a property with a B+ rating, or £500 if you buy an A rated home. Virgin Money, in addition to committing to lower rates than their core range for 2- and 5-year fixed rates, will also help cancel out the average UK home’s carbon emissions for a year by funding clean energy projects and are involved in projects supporting wind, solar and hydro energy. They also aim to help plant 100,000 trees!
Other lenders may be waiting to see how Green Mortgages are received before considering entering the market themselves.
All in all, it is fantastic to see mortgage lenders supporting the government net zero ambitions. It also complements a Scottish Ministers’ announcement to invest £1.6bn in supporting the decarbonization of heating, as well as introducing new housing standards.
Please note, lenders may change their products at any time.
If you require any further information regarding any of the information provided here, please do not hesitate to contact us. Likewise, it is important buyers seek advice from an expert mortgage adviser.
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