No, Green mortgages are not some sort of clever marketing campaign for the Bank of Ireland (Although we do think that they might have missed a trick not using that one in the past). Green mortgages are mortgages offered to buyers either as an incentive to buy a more energy-efficient property or to make energy efficiency improvements in their current home. Most green mortgages see lenders offer a more attractive interest rate, or a form of cashback to buyers that you won’t get with standard mortgage products.
Although most mortgage lenders now offer green products due to the big push towards renewable and environmentally friendly housebuilding, some lenders are still yet to jump on the band wagon leaving the bigger lenders to control the echo mortgage market. It is important to note that your property does not have to be purpose built to match the green product requirements. You can potentially modify your property by doing things such as installing solar panels, energy efficient windows and doors and new insulation which all can make you eligible for the products.
Whitegates estate agents through their own research have found that the following is generally true of properties mortgaged through a green deal:
1) A lower mortgage interest rate, meaning cheaper repayments
2) Lower energy bills
3) A higher-value property
4) Increased mortgage borrowing potential through less household spending on utility bills
5) A reduced carbon footprint
Green mortgages are part of the UK government’s pledge to reach net zero carbon emissions by 2050, with the energy efficiency of a property a key part of the mission. Currently this is measured by an Energy Performance Certificate (EPC) that measures how energy efficient a property is on a scale of 1 to 92, 92 being very efficient. The government announced that it hopes all properties in the UK will have an EPC rating of at least 69 to 80 by 2035 which is highly energy efficient. Right now, only 40% of homes meet this rating with 60% falling short due to unsustainable energy and construction materials used in older properties. Boris Johnson also outlined new plans this week at the Confederation of British Industry annual conference for every newly built property to include an electric car charging port by mid 2022.
So, that brings us on to the topic of older properties. Many economists and mortgage experts are discussing the possible impact that the push for green mortgages might have on the value and saleability of older properties with more restrictions on their construction i.e., listed buildings, Victorian townhouses etc. Mortgage lenders are keen to point out that you can improve your property to meet their green standards but often, these improvements aren’t cheap!
In an article for mortgage strategy personal finance analyst Sarah Coles comments: “The government’s plans for green mortgages could cut the value of older, family homes. It means anyone getting a mortgage could be encouraged to borrow extra cash for energy efficiency improvements as part of the deal. The additional cost of this borrowing could technically be covered to some extent by lower energy bills however, the problem is that while some properties can be improved at relatively little cost, other homeowners will find it prohibitively expensive. They may not be able to afford to borrow more, or the cost of changes to older properties may be disproportionately high, so they’d never recoup the cost of the improvements through a sale. Legislation is likely to include exception, to enable people to get a mortgage on these homes. However, it’s likely to get much harder to track down a cheap mortgage for an inefficient property, which will make them more difficult to sell, which in turn is likely to bring down their value.”
As it’s a relatively new initiative, only time will tell what the new eco friendly mortgage market will look like and what the potential impact of this push will be on older properties. If you or anyone you know wants to talk through a potential green mortgage or plan for more energy efficient improvements to your property then please get in touch on 02088771169.