Green Mortgages

Did you know that 40% of the UK’s Carbon Dioxide emissions come from households according to the Committee on Climate Change? In 2014, the average household generated 8.1 tonnes of CO2 per year. The Government has a target of reducing that down to 4.5 tonnes per year by 2030. This requires a massive decrease in emissions. Of the 8.1 tonnes generated by each household, 21% comes from electricity use and 29% from gas usage, so 50% of all household CO2 comes from the utilities we use to heat and power our homes. Obviously, this is not something that the Government can easily regulate or control, but there are clearly massive savings to be had by improving the Carbon Footprint of properties. Bear in mind that the Government has committed to have every UK home EPC rated to a level of C or above by 2035. In an attempt to incentivise homeowners, the Government has introduced the Green Mortgage scheme. In this article we look at what this scheme really is.

In 2017 the Government published its clean growth strategy and since then the powers that be have been working with Mortgage lenders to develop a range of mortgage products which incentivise greener homes. The outcome of this work was published in 2019 in the Green Finance Strategy, which was set up to start opening up green mortgage offerings, but what is a Green Mortgage?

In essence a Green Mortgage is one which does one of two things: Incentivises people to buy more energy efficient properties by giving preferential lending rates or incentivising property energy efficiency upgrades by requiring new owners to commit to an EPC rating improvement. The scheme also applies to loans, typically secured on the property to make upgrades to the energy efficiency.

Eligibility criteria for Green Mortgages can vary from lender to lender but they can cover aspects such as:

  • Buying a new build property with a predicted EPC of A or B (Barclays)
  • Retro-fit mortgages to focus on upgrading older properties (Saffron Building Society)
  • Additional borrowing on existing mortgages to finance improvements at a discounted rate (Nationwide). These improvements can be things such as
    • Loft insulation
    • Upgraded boilers
    • Cavity wall insulation
  • Self-builders or renovators who can apply for mortgages or loans at a discounted rate assuming they can demonstrate significant EPC rating improvements (Ecology Building Society)

As of April 2021 there were 26 green mortgage offerings on the market according to Defaqto It is expected that this trend will continue with more and more green mortgages coming on to the market in the near future.

The Government is committed to reducing the emissions of Carbon Dioxide in the UK by tackling one of the biggest emissions culprits, our homes. With these new mortgages on to the market, people are financially incentivised to either buy properties with good EPC ratings or make significant upgrades to existing properties.