What are green mortgages?

Green mortgages are mortgages offered for energy efficient homes; banks may offer a lower interest rate or a higher loan amount as an incentive for buyers.

These mortgage incentives can apply to both new build homes and homes that have been subject to improvements that have impacted on their energy efficiency or decreased their carbon footprint.

Some green mortgages can be a real draw for homeowners, in that they can offer reduced interest rates and cash back depending on the deal you secure and the lender that it is with.

Green mortgages are relatively new and have been launched to support the Government’s Net Zero 2050 vision by encouraging homeowners to choose homes that are more energy efficient to benefit from the mortgage deals associated with them.

The benefits of a green mortgage

As green mortgages are an incentive, there are many benefits associated with choosing one. These benefits will vary from lender to lender, so make sure to shop around. The benefits may include:

• Lower credit risk
• Lower interest rates
• Cashback offering
• Cash incentives
• Increased property value

Who qualifies for a green mortgage?

A green mortgage is a standard mortgage but is only available on homes that have a favourable EPC (Energy Performance Certificate) rating. If a home has an EPC of A or B, it is likely that you will be eligible to apply for a green mortgage although it is worth checking with a variety of lenders as to their application criteria.

The EPC rating requirements vary from each mortgage lender; not all offer for band A and B and the loan to value is often around 85%. Some also require that the home must be new build and must be bought directly from the developer, i.e. not a new build home that you will be purchasing as the second owner even if the EPC rating is A or B.

However, you could also qualify for a green mortgage if you have made significant home improvements that have elevated your EPC rating. Improvements could include installing solar panels or upgrading your heating system.

What’s the difference between a green mortgage and a normal mortgage?

The only thing that is green about green mortgages is they apply to properties that are more energy efficient. Lenders see these properties, especially in the current climate of carbon reduction and sustainability, as a sound investment that is more likely to hold its value. Furthermore, lower energy bills associated with A or B rated properties gives confidence to lenders that homeowners could have more disposable income to manage their mortgage payments.

As with traditional mortgages, homeowners will borrow a sum of money against their property, interest rates – be they fixed, variable or other - will be applied to the mortgage and monthly repayments are then made until the mortgage is complete. In the short time they have been around, deposits have typically been higher for green mortgages, so whether you are a first-time buyer or not, it is worth checking out your deposit or disposable income situation before starting the application process.

When were green mortgages introduced?

The first green mortgage was launched in 2018 by Barclays. Several high street lenders now offer green mortgages as do some of the small, independent lenders. But perhaps the biggest thing to be aware of is that whilst they are available, they may not offer the best terms, interest rates and cost efficiencies.

Things to consider when applying for a green mortgage

The main thing to consider is that green mortgages are not a ‘one size fits all’ - each lender has different requirements and lending benefits can vary from bank to bank.

As with any financial product or mortgage, it is worth seeking the advice of an independent financial adviser (IFA) or simply shopping around to ensure that you are getting the best deal for your property, and for you.

The bank’s green credentials

If using a mortgage provider that has green credentials is important to you, it’s worth looking at their ESG (Environmental, Social and Governance) policies to ascertain their true ‘green’ worth and see what they are doing to be more sustainable.  

Are Miller homes eligible for a green mortgage?

Green mortgages are eligible on homes bought directly with an EPC rating of A or B.

As a whole, Miller Homes play a key role in incentivising the purchase of new build properties across the UK by introducing a series of incentives for eligible buyers to help them purchase. Browse all of our available offers here.

New homes are looking greener

As new homes are being built to high sustainability standards, green mortgages are likely to become more common. The deals should become more favourable as consumers start to explore their options.

One thing is for certain – it’s an ever-changing landscape. We would anticipate that more lenders will start to offer green mortgages and that the scope of criteria and requirements will expand and be more fluid. If you like the sound of a green mortgage, it’s probably worth exploring the most up to date information and deals if it’s something that you think you, and the property you’re intending to purchase, may qualify for.

To get an initial idea of what your monthly mortgage repayment might be on a new home, use our new build home mortgage calculator.