How can your mortgage lender help make your home more energy efficient?

The Rise of Green Mortgages

Mortgage lenders are now offering enhanced cashback and other rewards for improving the energy efficiency of your home. For example, by moving your property into a higher EPC (Energy Performance Certificate) band or increasing the rating by a set number of points within a certain timeframe after your mortgage is completed, you could be eligible for cashback. You can evidence this by requesting an updated EPC or having the work done by trusted companies approved by the lenders. Additionally, some lenders are open to using tools such as Propflo’s GreenVal platform to help make your property more energy-efficient. Others offer discounts on energy products, like Barclays, which provides discounts on Hive thermostats.

Green Home Improvements

For existing homeowners, many lenders offer what they call “green additional borrowing” or “green home improvement mortgage products.” These products offer lower rates for energy-efficient upgrades like insulation, solar panels, boiler upgrades, air source heat pumps, double glazing, or even replacement windows. There are extremely competitive rates available for these improvements. For example, Nationwide is currently offering 0% interest rates for existing mortgage customers borrowing between £5,000 and £15,000 to carry out energy-efficient upgrades.

Enhanced Lending for Energy-Efficient Properties

Lenders are also incentivising the purchase or remortgage of energy-efficient properties. There is potential for enhanced lending amounts for new build properties, which are typically more energy-efficient. Lenders recognise this by offering slightly higher lending amounts due to the lower associated energy costs. Additionally, many lenders offer cashback incentives when purchasing or remortgaging an energy-efficient property, typically ranging between £200 to £500, paid after the new mortgage starts. While not as common, some lenders also provide enhanced rates for energy-efficient properties. Although this is less prevalent now, it is expected to become more commonplace as offering better rates is more beneficial than just paying cashback.

To qualify for these benefits, you usually need an EPC rating of A or B for residential properties, a predicted energy assessment rating or even a C for a buy-to-let property.

The Role of Mortgage Brokers

A mortgage broker is invaluable in navigating green mortgage products. Since lenders regularly change their criteria and mortgage products, particularly with green options being a relatively new feature in the industry, a broker is best placed to find the most appropriate lender for your needs. They ensure you get the best possible deal by comparing a wide range of lenders, including those offering green mortgages. Brokers like Habito, who operate fee-free, can manage this process for you.

The table on this slide is part of an evidence of research document issued by brokers to their customers. It shows various mortgage products and highlights those that cannot be recommended due to not meeting the minimum EPC rating, as indicated in the far-right column. For example, the top two deals from HSBC offer £500 cashback, as shown. This demonstrates what a customer could have had if they owned an energy-efficient property. The second from the right column ranks products by cost-effectiveness over the deal period, with the green HSBC deals being the best option for properties with an EPC rating of A or B.

Moreover, some brokers offer tools like Propflo’s GreenVal to assist in making properties more energy-efficient and environmentally friendly.

In summary, there are many green mortgage options available, and brokers like Habito are well-equipped to help you find the best possible deal for your needs.