This guide was last updated 27 January 2022
Currently, we are all looking to do what we can to help the environment – from washing clothes at lower temperatures to seeing if we can make using an electric car work in our busy lives.
Mortgages and mortgage providers are also getting behind the ‘we need to do something’ urgency as well and their response is to produce ‘green mortgage’ products.
Currently, the vast majority of green mortgages are just a normal mortgage product with a small reduction in the interest rate or some cashback (e.g. £500).
These are meant to encourage, or reward, borrowers who are buying, or already own a property that is energy efficient enough to warrant an Energy Performance Certificate (EPC) rating of A or B.
Every property in the UK that was sold or rented since May 2010 has had to have an assessment of the energy efficiency of that property and a certificate was issued that lasts ten years. If you would like a green mortgage product, then the rating for your property must be ‘A’ or ‘B’ – the top two ratings.
The valuer, who the lender will instruct to inspect your property, will search the register for a valid certificate to check. If the certificate is out of date, you have carried out energy-enhancing improvements, or there is no certificate showing, you will have to commission a new EPC assessment.
Once the valuer has confirmed to the lender that the property has the necessary EPC rating, the lender will allow you to access an appropriate product from their ‘green’ range. This product is likely to be a little cheaper than standard mortgage products, which will save you money along with lower energy bills than most due to the relatively high efficiency of your property.
You can find the EPC certificate for your property by using this link to the government’s central register – https://www.gov.uk/find-energy-certificate
This is a public access register that will show you what the overall rating is and when it is valid until, and within the certificate itself, what is recommended to move up the register towards the top ‘A’ rating.
Since green mortgages are a product range offered to qualifying borrowers based on standard mortgage products, they have similar properties to those that have been available for many years. There a fixed rates, variable rates, and tracker rates.
The fixed rates tend to be for two, three, and five years, but the variable or tracker versions can also be for longer periods.
The method of repayment is a separate aspect of your mortgage, therefore, many green mortgage products can be obtained on a traditional repayment (aka capital and interest), interest-only, or a mixture of both.
There are more and more lenders offering green mortgages nowadays with banks, building societies, and specialist lenders all trying to compete in this space for borrower’s business. Which lender and product are best for you will depend on your circumstances, what they are actually offering at the time and what suits your needs.