What is a green mortgage?
Already widespread in the USA, green mortgages are still relatively unknown in the UK even though they are gaining exposure. As more and more people are paying attention to environmental issues around the world, UK banks have started to follow suit and have extended their offers to this new kind of mortgage.
|Source: Ecology Building Society|
A green mortgage is a mortgage used to finance green installations for your home or to finance the purchase of a sustainable property. It can also take the form of a lower interest rate given to people taking action to make their homes more energy efficient. These installations can be of any kind, including energy efficient upgrades such as double glazed windows or devices that help you save resources on heating and cooling. With some of these mortgages, nearly any kind of habitation is considered including your current home, a new property that you intend to buy or an old property that you would like to renovate. The only condition required to qualify is that it benefits the environment in one way or another.
Green mortgages can therefore benefit both you and the environment as they allow you to invest in equipment that will help you save money long term as well as receive a bigger loan or a lower interest rate than you would have otherwise. Indeed, according to the ecology mortgage rate system you can earn up to 0.75% off the standard variable by achieving an A grade on your EPC. To achieve some of the highest discount rates of 1%-1.25% you would need a Code for Sustainable Homes (CSH) code level of 5 or 6.
What kind of improvements?
It is important to note that there are no definitive criteria for qualifying for a green mortgage as every lender has their own conditions. However, by following some of the advice below, you will increase your chances of success.
Thermal insulation acts as a barrier that keeps heat inside during winter and outside during summer. Roof insulation, cavity fill, internal and external insulation, and floor insulation can all benefit from the ‘green’ discount. Insulation materials from organic sources may be preferred.
There is no unique insulator that fits all applications. Insulation for walls, for instance, has to built to prevent settling/shrinking with time. Meanwhile, for the attic you need to make sure you choose an insulation product with a high thermal resistance in order to protect your home from overheating in the summer.
After all this it’s important that you don’t forget your windows as you would risk ruining all your efforts! Install double glazing and equip them with blinds to avoid the windows from overheating during the summer.
Installing renewables on your property can be an excellent way to reduce your environmental impact and save money on your energy bills. In order to qualify for the discount, the renewable systems and installers you use must be accredited under the Microgeneration Certification Scheme.
Saving on water, heating and appliances
In a typical UK household, heating and hot water represents the biggest expenditure on fuel. Luckily, there are numerous ways that you can reduce the amount you spend, for instance you could install a wastewater heat recovery system to help you save on hot water. This type of system recycles the heat coming from the water of the shower, cleaning appliances and bathrooms sinks, reducing overall consumption.
What the future holds for green mortgages
Peter Bonfield , who leads the government commissioned review of domestic energy standards in the UK, revealed that they were discussing the possibility of green mortgages with high street mortgage providers. In a similar bid to build up the link between energy efficiency and mortgage borrowing, a research group led by Nationwide Building Society and UCL is investigating how Energy Performance Certificate (EPC) data can be incorporated into affordability calculators.
Contributors to the article
Simon is an avid DIY enthusiast, a contributor to industry publications and has 20 years’ of experience working within the building merchant trade.
Simon has a keen interest in sustainable living. He is the founder and Managing Director of Drain Depot.
Begum is a mechanical engineer with a MSc. in Sustainable Energy Technologies and Management with Distinction (Brunel University).
Begum currently works with sustainability assessments and she previously worked in the National Energy Study (NES) – a behaviour change study of 500 homes across the UK.