Green Mortgages

With the COP26 summit in full flow, climate change is a hot topic right now and green mortgages are entering the market. While the Oxford English Dictionary announced “vax” was the word of the year for 2021, “net-zero” can’t have been far behind. From housebuilders to mortgage lenders, major players in the housing market are looking for ways to reduce their carbon footprint and incentivise homeowners to follow suit. Methods that, it ought to be said, are a little more constructive than blocking emergency vehicles and gluing your face to the M25…

Whether it’s recycling household waste, purchasing energy-efficient appliances or installing solar panels, we all know how we, individually, can help do our bit for the environment around our homes. Banks are, more often than not, huge corporations and they have a responsibility to reduce their impact on the environment, direct and indirectly. A progressively increasing number of mortgage lenders are now looking for ways to incentivise buyers to reduce their carbon emissions. The following list includes the most prominent ways in which they are doing this:

  • “Green Mortgages” – These have been available for some time now, typically on properties with an A or B EPC rating to incentivise buying energy efficient homes. Unlike utility providers who often require you to pay more for green energy, some mortgage lenders are offering lower interest rates on qualifying properties. ONS data states residential properties in the UK make up 15% of our total climate emissions so being as energy efficient as possible around your home is one step towards doing your bit.
  • Energy Performance Certificate (EPC) Ratings – Many lenders will place minimum restrictions on the EPC rating a property must have. While this is in part to do with the saleability aspect of the property, it does facilitate increased demand for energy efficient homes if older homes are less mortgageable. Also, it encourages sellers of properties with a low EPC rating to improve the energy efficiency of the homes before putting them on the market. This can only be a positive for the environment.
  • Cashback Incentives – A small selection of lenders will offer a generous cash back incentive if you can show you’ve reduced the EPC rating of your property after you’ve moved in. If this is available to you, it should have been discussed by the advisor when setting up the mortgage and it will be outlined in your mortgage offer. While these may not always be the cheapest products, if you do go ahead with one of them, it’s a win, win making your home more energy efficient!

As well as mortgage lenders, national house builders building thousands of homes each year have a significant responsibility to ensure the next generation of UK homes are energy efficient. Through utilising innovative, clean technology, the new homes of the future could function very differently to the ones we see today.

Barratt Homes are currently building their first “gas-free” development, Delamere Park, Somerset, which will utilise the much-discussed heat pumps in place of traditional gas or combi boilers. Further to this, Barratt has also constructed the first zero carbon home to be built by a major housebuilder in the UK. Supported by government funding and using modern methods of construction, the “Z House” on the University of Salford main campus is a zero-carbon concept home showcasing the future of sustainable living in the UK. Barratt has pledged all its new homes will be zero carbon by 2030 and other major developers will likely have similar targets.

If you want to know if your home would be eligible one of the green mortgages, or you’re looking for a lender who’s making a conscious effort to reduce their carbon footprint, let us know and we can see what products are available to you.