Green Mortgages

by Mark Johnston

The UK government and lenders are now being urged to do more to reward borrowers who want to do their bit for the environment.

The government wants to roll out ‘whole house energy makeovers’ to improve the energy efficiency of the UK’s 22 million homes.

Many experts want lenders to consider offering accessible mortgage products for people looking to buy more energy efficient properties which would bring down carbon emissions as well as household fuel bills.

Alex Neil, cabinet secretary for Infrastructure and Capital Investment, said “existing and prospective home owners should be encouraged and supported to invest in new forms of technology and energy efficiency measures, and lenders need to be part of the solution by providing suitable home loans”.

Home buyers and owners who already have a firm commitment towards environmental issues may also want to shop around for consumer products that best match their beliefs and values. Therefore it seems there is considerable public interest in anything that claims to be eco-friendly and green mortgages are no exception to this growing trend.

Some banks and building societies are already leading the way in providing home loans that encourage environmental sustainability. Although some commentators are sceptical about the motives behind big banks beginning to provide green mortgages. However, these institutions have often been very active in implementing initiatives that may be termed eco-friendly.

At present there are only a limited number of supplies in the green mortgage market. Therefore anyone looking to obtain one is likely to have to comply with fairly stringent requirements in order to be eligible.

There is no standard definition of a green mortgage and it is therefore up to individual lenders whether they offer a ‘green’ product.

Obtaining a green mortgage can be a time consuming process and often quite difficult and for this reason an increasing number of providers are now offering green options on their standard mortgages.

At the most basic level lenders will make a donation to an environmental charity for each mortgage they arrange. Other lenders have schemes in place to plant trees to help neutralise or reduce the carbon footprint and some are willing to offer a cashback package to those customers who agree to install energy saving devices in their homes.

One of the main suppliers of green mortgages is the Ecology building society and the key factor with this lender is that they consider the property and not the borrower. In order to qualify for a mortgage the borrower has to prove a range of factors such as sustainability, carbon emission reduction and the use of reusable materials.

The building society routinely offers a competitive rate of around 5.7%, with further discounts for new borrowers.

Another provider of these particular mortgages is Norwich & Peterbrough building society who offer discounts on standard mortgages as long as the borrower makes an effort to become more energy efficient.

Therefore anyone applying for a green mortgage should seriously consider the various ways in which to make their property more environmentally friendly.

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