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How does a green mortgage work?

Michelle Monck

Michelle Monck

Consumer Finance Expert

At a glance

  • Green mortgages offer rewards for those purchasing energy-efficient properties
  • You will likely need an Energy Performance Certificate at A or B to qualify
  • Some green mortgages offer cashback

 

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What is a green mortgage in the UK?

A green mortgage in the UK is a mortgage that offers buyers of energy-efficient homes favourable terms for this choice of property. Most often, lenders offer a lower rate of interest or cashback on green mortgages.

How do you qualify for a green mortgage?

Each lender will have its own terms and conditions and maximum loan-to-values for green mortgages. It is likely that your property will need to meet a minimum level of energy efficiency. For example, Barclays requires an energy efficiency rating of 81 or above or an Energy Performance Certificate (EPC) at bands A or B. NatWest requests an EPC at A or B. Nationwide Building Society has a minimum efficiency rating of 86. The Ecology Building Society bases its whole ethos around supporting ecological building practices and sustainable communities. It offers a discount on the mortgage interest rate based on the improvement made in your property’s EPC rating. This is available for renovations, conversions and new self-build properties as well as purchasing a new-build property. This discount is then applied for the full term of your mortgage.

You can check if a property has an EPC using the government website.


Those purchasing a new-build should receive a Predicted Energy Assessment to provide a predicted energy rating. Lenders may ask to see this to check you are eligible for a green mortgage.
Lenders may also require buyers to purchase a new-build directly from the developer.

Are green mortgages a new thing?

Barclays launched the first green residential mortgage in 2018, and in July 2020 Just Group launched the first green lifetime mortgage. Both building societies and high street banks now offer green mortgages.

What interest rates are available for green mortgages?

Green mortgages can offer more competitive mortgages rates as some lenders discount these as a reward for purchasing an energy efficient home. Other lenders offer cashback as an incentive.

Find a renewable energy supplier

You can switch easily and could save money when switching to a renewable energy tariff.
Find out more about saving money on your energy costs in our guide.

Are there broader ethical mortgages?

Ethical mortgages don’t currently exist as a category but there are ethical lenders offering mortgages. These include Triodos, The Co-Operative Bank and Sharia Banks offering house purchase plans.

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