Nationwide also offers additional “green” borrowing, where customers get a preferential interest rate on money borrowed to carry out green home improvements.
Halifax offers £250 cashback if a customer is purchasing or remortgaging a main residential property with an EPC rating of A or B.
Some remortgages and homebuyers can also get up to £500 cashback for making energy-efficient home improvements — such as installing insulation, a new boiler or double-glazed windows — or up to £1,000 cashback for fitting a heat pump.
While the prospect of a green mortgage sounds like a great financial incentive to have a reduction in the mortgage rate, unfortunately there is still a lack of innovation from lenders on both a criteria and product front.
There are lenders such as Ecology Building Society, which offers self-build mortgages on properties that are energy efficient and can consider timber-frame and timber-clad properties.
The only green products on the market are fixed, so they are not accessible for those that are looking for a tracker or discounted product to benefit from an eventual rate decrease.
How can brokers help borrowers navigate green home finance?
There needs to be as systemic change in how the financial sector engages with clients and stakeholders around green energy education.
Most mortgage applications are now done through an intermediary rather than through a lender directly. As a result, the client (rightfully) expects the broker to be able to talk about a range of subjects confidently — including green mortgages.
Certain government proposals under consultation may mean that new tenancies could be banned on rental properties with an EPC rating of D or below, from 2025. Those with existing tenancies would need to comply by 2028 to be able to let out the property.
Brokers need to start acknowledging and understanding that they can no longer assume green mortgages are a flash in the pan.
Lenders’ criteria and products are continually adapting to market demands. For homeowners looking at home improvements, brokers need to be discussing different lender incentives available, which are designed to support households retrofitting properties.
Saffron Building Society currently has a retrofit mortgage that rewards the homeowner by making effective improvements to the EPC rating of the home.
Knight Frank analysis found “that homes which had moved from a D to a C rating added an additional 3 per cent to their value over and above local house price growth, equivalent to £9,003 based on the average resale value. Homes moving two bands from an E to C saw an average price uplift of 8.8 per cent (£29,289) and from F/G an additional 19.6 per cent (£64,444). The analysis controlled for changes to property size”.
