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Big rise in Green mortgages as energy efficiency drive is on

Recent research shows an 18 per cent increase in the number of Green mortgages available in just a six month period.

Financial information service Defaqto, in research up to late April this year, found that overall there was almost a fifth more mortgages linked to EPC rating and energy efficiency than six months earlier. 

In total, there were 648 green mortgagees available in April compared to 550 last October.


The biggest change in that mortgage niche was in the Buy to Let sector where there were more than three times as many mortgages available to landlords: 292 green BTL products on the market in April, compared with just 85 last October. This is being driven by changes in the regulations for rental properties, which will have to have an EPC rating of C and above by 2025 for new tenancies.

Conversely, the number of mortgage products available to residential borrowers has fallen. In April there were just 356 mortgages available compared with 465 last year, around a quarter less.

So-called ‘Green’ mortgages are designed to offer borrowers preferential terms to buy a property that meets certain environmental standards. This will often be a new-build property that has a high energy efficiency rating, but they can also be used for properties where they have been renovated to improve their environmental performance. Generally, properties with an energy efficiency rating of A or B are eligible, although some lenders offer green mortgages for homes with a rating of C or above.

Katie Brain, consumer banking expert at Defaqto, says: “It is encouraging to see that the green mortgage market is growing. Although this is predominantly in the BTL sector, this still represents a sizeable number of homes that will be made more energy efficient as a result.

“If you are thinking of getting a green mortgage, it is worth discussing your options with a mortgage adviser who can explain what is available to you. Generally, newer homes will meet the criteria as they are built with modern regulations in mind, but older properties may need to be updated to ensure they are energy efficient.

"The cashback incentives typically offered with these ‘Green’ mortgages can make it worthwhile as opposed to the standard mortgage range.”

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  • George Dawes

    You’ve got to be pretty green to fall for this climate twaddle

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    It's the APR and other t&C's that matter, not what colour they call the mortgage.

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    If a property already has the required EPC rating getting the slightly better mortgage rate is a nice idea. In the BTL market it's obviously a lower risk for the lender, especially on 5 year mortgage deals.
    There are currently 2 main flaws in the concept.
    The first one is that if you buy a property that has a lower EPC the mortgage rate doesn't drop if you make energy improvements and get a better EPC. If these 'green' mortgages were anything to do with energy efficiency and not just a straight risk based product there would be a facility for the rate to drop mid term on production of an improved EPC certificate.

    Secondly if a mortgage broker makes a mistake and applies for the wrong product. My son has had this issue and the brokers error is going to cost him an extra £30 a month for the next 5 years. The house has an EPC C, which some lenders class as green while others don't. The green product was £1.60 a month cheaper than the standard product. The broker didn't check the criteria properly as the NatWest green mortgage is only for EPC A or B. Originally he'd been talking about applying to Nationwide or Halifax and then suddenly decided NatWest. Perhaps NatWest pay a higher commission? By the time the lender processed the application interest rates had risen and instead of just viewing it as an error on the part of the broker and switching it to the standard product NatWest decided to reject the application and reprocess it from scratch on it the new higher interest rates. By that time everyone else's rate had risen so there was no point going elsewhere.

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    I don't understand what's in it for the lender. What difference does it make to the lender what the EPC rating is? Seems like a marketing gimmick.


    For BTL mortgages it's a much lower risk. None of us know if EPC is going to become a requirement but if it does improving EPCs on some houses is going to be costly and will require the property to be empty while work is carried out. That massively increases the risk that a landlord may be unable to pay the mortgage.

    For residential mortgages it's just a token gesture so lenders can claim to be environmentally aware and be seen to be doing their bit. The discounts on residential rates are derisory. The one my son applied for was 1.98% for the green mortgage or 1.99% for the standard one. Because the broker got it wrong he's now having to pay 2.24%.


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