Green Mortgages
Making the journey from Military accommodation to purchasing a home will normally require a mortgage, of which there is an abundance to choose from. However, relatively new ‘green mortgages’, or energy-efficient mortgages (EEMs), incentivise homeowners to purchase energy-efficient homes or make eco-friendly upgrades to existing properties.
By Fiona McCann
What is a green mortgage?
Green mortgages aim to encourage owners to improve a property’s environmental credentials, or finance properties already meeting certain eco-friendly standards. While these mortgages function like standard options requiring monthly repayments over a typical 25-year term, the ‘green’ aspect relates to the property’s energy efficiency, not the loan itself.
Purpose
Residential properties contribute about 20% of the country’s greenhouse gas emissions. With around 60% of UK homes rated D or lower on the Energy Performance Certificate (EPC) scale. The UK government has set a target of net zero carbon emissions by 2050, and to help achieve this they are encouraging green mortgages to promote energy-efficient homes. Green mortgages can also finance necessary improvements to boost efficiency.
Eligibility
To qualify for a green mortgage, homeowners must meet one of two criteria:
• Energy-efficient home: the property must have an EPC rating of typically A or B.
• Planned improvements: homeowners plan to undertake upgrades like double glazing or loft insulation, to improve the home’s EPC.
Cost
Interest rates will vary based on the loan to value and the mortgage type. Generally, green mortgages might be more expensive than the best deals in the market but cheaper than comparable rates from the same lender. For example, one lender offers a non-green 3-year fixed rate product at 5%, compared to their 4% for a green mortgage.
Considerations
Pros:
• Incentives like discounted rates or cashback upon completing energy efficiency improvements.
• Savings on utility bills, due to enhanced energy efficiency.
Cons:
• Potentially higher costs compared to the other best standard mortgage deals.
• Limited ability to shop around and compare products.
• Various caveats and conditions.
The future?
The Financial Conduct Authority (FCA) predicts growth and innovation in the green mortgage sector. Lenders are expected to increase green lending targets and the Government is considering policies to encourage energy-efficient properties. This could include setting minimum EPC ratings, driving demand for green mortgages.
In summary, green mortgages offer financial incentives for eco-friendly homeownership, aligning with broader environmental goals and potentially reducing long-term energy costs for homeowners. Overall, there are numerous benefits, with plenty of reasons to consider a new build for your future home.
About Fiona McCann
Fiona McCann Served with RLC as a Driver, touring Northern Ireland multiple times, Canada and Cyprus. She left to pursue a career in the property sector, surveying homes for mortgage lenders, and is currently studying to become a lawyer.
