UK homeowners could be losing out on mortgage savings as 80% of UK homeowners admit they are not familiar with green mortgages and the benefits they offer, according to a new survey conducted by David Wilson Homes.
The survey of 500 UK homeowners, , also revealed that 85% would consider opting for a green mortgage if it could help them reduce monthly repayments.
So what are green mortgages and what are the benefits?
Terry Higgins, mortgage expert and Group MD of TNHG New Build Mortgages, explains: “Green mortgages are one of the most recent mortgage products being offered by many high-street lenders.
“They’re designed to reward people living in energy-efficient homes or people carrying out green home improvements. They can come with various benefits, including cashback, lower interest rates, and potentially the ability to borrow more.
Green mortgages come in two broad categories: EPC rated mortgages and green home improvement mortgages.
Higgins says: “Many green mortgages offer lower rates of interest to those buying or remortgaging homes with an A or B EPC rating.
“All new build houses in the UK meet A/B EPC requirements, meaning that new homes will be able to qualify for green mortgages.”
Whilst some lenders will offer up to £1000 cashback, lenders like Halifax, Leeds and Accord all offer improved affordability assessments, meaning you could borrow more if you are buying a home with an EPC rating of A or B.
Green home improvement mortgages are designed for buyers or remortgagers who are committed to making sustainable improvements to their homes.
They offer additional borrowing at a lower interest rate or access to finance for new improvements, from installing double glazed windows, new insulation, heat pumps, or solar panels.
Barclays and Halifax offer rewards of up to £2,000 for making green improvements to a home. Nationwide offers 0% interest for their Green Additional Borrowing mortgage, allowing people to borrow from £5,000 to £20,000 to make energy-efficient home improvements.
Are green mortgages more environmentally friendly?
Higgins says: “It’s a common misconception that green mortgages are more environmentally friendly than conventional mortgages.
“The ‘green’ in green mortgages refers to the requirements needed to qualify for a green mortgage. It does not mean that your mortgage lender will be investing your payments into green initiatives or schemes.”
He points out that green mortgages have seen a steady increase in Google searches in the UK over the past 15 years, averaging around 9,000 Google searches per month over the past year.
“Studies published by the UK government found that only around 15% of homeowners would be willing to borrow money to finance green home improvements, however, they also found that 66% plan to improve the environmental sustainability of their home in the next 10 years, so it appears that there are mixed messages.”
As to whether home owners should choose a green mortgage, Higgins says: “While green mortgages may have more exclusive requirements and offers, they may not always be the most suitable choice.
“Reduced interest rates and cashback schemes could help reduce monthly mortgage payments more than many mortgage options, but [home buyers] may still find cheaper deals by shopping around or speaking to a mortgage adviser.
“I would encourage people to research all the options available to them. Many homeowners may not realise they qualify for a green mortgage, or that their home meets the requirements, meaning they could be losing out if it is the cheapest option for them.”
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