Green Mortgages
Green mortgages are usually best suited to those looking to buy new-build homes or make energy efficient upgrades to older properties for purchase or remortgage.
We look at how they work, how they could save you money, and whether green home finance is the most cost–effective option for all borrowers.
Simply answer questions about your mortgage goals and if you’re mortgage-ready, we can arrange for you to speak to one of our experts.
Going above and beyond to save you time and money on your mortgage
Paperwork help ✅ Online mortgage broker exclusives ✅ Works alongside 70+ lenders ✅
1. Add your details online
No 2-hr phone calls or branch visits. It takes a few minutes to tell us what you need from your next mortgage online
2. Choose how & when to speak to your broker
ASAP? Or choose the perfect time - 6 days a week and evenings
3. Get your mortgage with Mojo
We’ll check and chase to help avoid delays. Get regular updates from your broker and case manager
What is a green mortgage?
A green mortgage rewards you for either buying an energy-efficient home, or investing in sustainable home improvements. Many people assume that, the mortgage lenders themselves have climate friendly investors and green credentials, but this is actually untrue of most green mortgage providers.
Nevertheless, green mortgages seem to gain continued traction in the UK market, and provide great deals for many applicants, especially those looking to minimise the carbon footprint of their home.
Green rewards vary from lender to lender, and deal to deal, but may include:
-
More competitive interest rates - sometimes referred to as a ‘green mortgage rate’
-
Cashback on completion
-
Interest-free or low-interest loans for specific green home improvements - such as adding solar panels
-
Ability to borrow more when using funds for green home improvements
In fact:
We’ve noticed that Mojo applicants, on average, borrow around £22,000 more with a green mortgage application, compared to other mortgage types (£196,000 vs. £174,000).
This is despite there being virtually no difference in the average property value when buying with a green mortgage (£339,039) compared to a non-green mortgage (£339,860).
Are there any other benefits to a green mortgage?
In addition to the lender incentives listed above, there are a number of indirect benefits to using a green mortgage:
-
Energy efficient homes are likely to become more attractive over time, both due to increased individual awareness of borrowers and the increased move towards governments setting sustainability targets. This could lead to them becoming more desirable and therefore, better holding their value
-
More energy efficient homes generally have lower utility bills, bringing down the overall cost of home ownership
-
Lenders are already beginning to see energy efficient homes as less risky for both of the aforementioned reasons, meaning securing a mortgage on this type of property could become easier than on older, or less efficient homes. Some lenders have also already set themselves decarbonisation targets, so may be looking to offer green products as a means of meeting them
-
Tenants have also shown a vested interest in green homes, likely due to the potential for lower energy bills - in fact, a Uswitch survey found that 43% of people would pay a higher rental value for an energy efficient property. This could make green mortgages and home improvements more important to landlords
How does a green mortgage work?
The mortgage itself works in exactly the same way that any other mortgage would, the difference lies in the qualifying criteria and the incentives offered by the lender.
Once your loan is approved and the mortgage application completes, you’ll usually benefit from whichever incentive the lender is offering on their green product. However, you’ll need to meet their specific green criteria for that particular deal.
How do I qualify for a green mortgage?
Criteria varies between lenders, but you’ll need a valid Energy Performance Certificate (EPC). If you’re buying a home, the EPC rating will be available as part of the property information, but, if you’re remortgaging, you may need to apply for an EPC assessment. An accredited domestic energy assessor can provide a certificate for around £44.
Most lenders require an EPC rating of A or B, although some offer incentives on C rated property
Others focus on the numerical value, which usually needs to be higher than 80
If you're looking to remortgage or buy a property with an EPC rating between D and G (or below 80), some lenders will still provide a green mortgage, so long as the funds go towards achieving a qualifying EPC rating, post renovation
What is an energy performance certificate (EPC rating)?
An EPC is the certification document indicating the level of energy efficiency of a property is. When a property is built, they are a requirement, so all new build homes should have this data available, even prior to completion - this is known as a PEA (Predicted energy assessment).
You’ll also need to provide an EPC whenever a residential property is sold (or rented), so all prospective homes will automatically include this information within the documentation.
Certificates last for 10 years and are issued on a scale of A to G, A being the most energy efficient. However, if you make efforts to improve the EPC rating of your home, you can get it reassessed sooner.
Please note: Green criteria are in addition to the standard mortgage criteria for all mortgages, such as affordability, credit score, age, deposit size, etc.
Can I get a green remortgage?
Yes you can, in fact, many applicants use green remortgages to make renovations to their home, as you can typically borrow more with this type of loan when making energy efficiency upgrades.
At Mojo our green mortgage applications showed to be 67.5% used for remortgage purposes, versus just 32.5% for purchase applications.
Who offers green mortgages?
Over the past decade, the availability of green mortgages has increased substantially, and at the time of writing* there are 61 products from 29 lenders across the market that qualify as ‘green deals’.
Building societies tend to have more options than high street lenders, but Barclays, NatWest and Halifax are among the bigger banks that do offer green deals.
Some green mortgages available at the time of writing* are:
-
Nationwide - Green Reward Cashback
-
Virgin Money - Greener Mortgages
-
Ecology Building Society - full range of mortgages are green
-
Suffolk Building Society - Green Further Advance
-
HSBC - Energy Efficient Homes Cashback
-
Foundation Home Loans - Green mortgage
-
Progressive Building Society - Green mortgage
This is not an exhaustive list, so be sure to speak with one of our mortgage brokers if you’re keen to secure the best green mortgage option for your needs.
*September 2024
Please note: certain green mortgages, including some listed above, are not available directly to the public, so would need to be sourced through a broker
What's the point of a green mortgage?
You only need to review the incentives and indirect benefits outlined above to understand the point of a green mortgage. Largely, for the individual, it offers the potential to save money, futureproof the value of your home, and decrease your carbon footprint.
From a lender perspective, it’s about hitting targets, either self-imposed, or set by the government, as well as reducing the risk in future lending by generally improving the energy efficiency and attractiveness of UK housing stock.
Our experts say
‘Since NatWest and Halifax began offering green mortgage products, we’ve seen a number of other large lenders introduce them to their range. They can be particularly useful for those purchasing new build homes, almost all of which will have an EPC rating of A or B. I’ve also noticed their use in the remortgage market increase over the last 18 months, as those approaching their first remortgage on a new build home seem to access better rates or additional cashback using a green mortgage.’
Mortgage expert, Matt Morris, Mojo
The increased popularity of green mortgages
As shown in the below graph, as the availability of green mortgages in the UK has increased, Mojo customers have increasingly opted for this type of mortgage deal.
This is especially true of 2024 to date, which demonstrates a significantly larger uptake of green mortgages than in the previous 3 years.
Is a green mortgage cheaper?
There’s no definitive answer to this, as it really depends on the property and the range of mortgages available to you.
Lenders generally set the interest on their ‘green deals’ lower than on their other deals. However, this doesn’t mean that there won’t be non-green deals with a different lender that are cheaper than that. It also depends on whether your property qualifies for the best green mortgages available, as some lenders have more stringent criteria than others.
In the longer term, the type of property you would qualify for a green mortgage with is likely to have lower energy bills due to higher energy efficiency. This means that, overall, it may still be your best option in the long run, despite not necessarily having the cheapest rate of all.
There’s a lot to consider if you’re looking at green mortgages, and a more energy efficient home, so it’s a good idea to speak to a mortgage broker with knowledge in this area. They can help you weigh up your options and look at your short term versus your long term intentions.
What is a green buy-to-let mortgage?
Green mortgages are available on buy-to-let properties from an increasing number of lenders. This is likely due to potential future changes to EPC legislation on rental property, or the increase in tenants looking for more energy efficient homes due to generally high utility costs in the UK.
Mortgage expert Matt Morris commented:
‘A surprise to me is the amount of buy-to-let green deals available at an EPC rating of A-C. Many landlords also seem to have bought new build stock. This is likely because they are rated A-B as standard.
It depends on your definition of eco-friendly. Green mortgages are offered on properties that achieve higher energy efficiency ratings. On this basis, they both encourage the purchase of more eco-friendly homes, and offer incentive for people to improve the energy efficiency of their existing homes.
However, for the most part, lenders are not ‘green’ themselves. With the exception of Ecology Building Society, green mortgage providers don’t typically have any stand-out ‘green credentials’ or specifically ethical investment practices.
If you’re looking to remortgage onto a green mortgage but are worried that you won’t meet the criteria, it’s perfectly possible to improve the energy efficiency of your home and order a new EPC assessment before you apply.
Many of the changes, such as cavity wall or loft insulation, replacing single-glazed windows, solar panel installation, and new boilers can be pricey. However, there are certain lenders offering interest free loans to make this type of improvement. You may also be able to do so with a green remortgage, so long as the additional funds are for eco-renovations.
There is not enough data in the UK market to definitively answer this at the current time, due to the relatively small market size for green mortgages. However, in the US, green homebuyer trends speak for themselves, and it’s fairly likely that the UK will follow suit in coming years, given the increase in availability.
Coupled with global green initiatives in all products in recent years, it’s probably fair to assume that at some point, green homes will sell faster than their less energy efficient counterparts.