10 Apr 2018
Author: Stephen Breen
‘Going green’ could soon secure you a better mortgage deal, with incentives available for the most energy efficient borrowers. The Government Green Finance Taskforce published a report on 28th March that urges lenders in the UK to take green factors into account when making lending decisions: and a high street lender, yet to be named, will be the first to take this on board.
The report recommends that UK lenders should “work towards promoting awareness and mainstreaming a consideration of ‘green’ factors into all their mortgage lending decisions.”
In addition, it suggests the Government should “provide short-term incentives to pump prime the green consumer loans and green mortgage markets.”
A number of ‘green’ factors could be taken into account as part of the incentive, such as good insulation, low energy bills and low water usage.
It is not yet known what incentives will be on offer but some suggestions include low interest rates or stamp duty incentives for borrowers purchasing greener homes, or increased loans for borrowers who plan to make their new home more energy efficient.
Borrowers can already take out mortgages which offer discount loans on green homes: the Ecology Building Society provides specialist lending facilities for renovation projects that aim to improve energy efficiency. The lender’s Standard Variable Rate (SVR) is discounted by 0.25% for every EPC rating the property improves by. However, such mortgages are not a best buy, with the maximum possible discount on an A rated property bringing the lender’s SVR to 3.15%.
Elsewhere, ‘green’ mortgage deals are nothing new: mortgage lending rules in the Netherlands allow borrowers to take up to €25,000 extra in order to purchase or make refurbishments to a net zero energy home; whilst in the USA, two state-owned mortgage providers offer lower interest mortgages to purchase more energy efficient properties, together with low interest loans to help fund improvements. Similarly, in Switzerland, borrowers can enjoy preferential mortgage terms from 30 Swiss banks on newly constructed or renovated building achieving the ‘Minergie’ energy and comfort high performance label: where buildings have a high-grade, air-tight building envelope and benefit from the continuous renewal of air inside the building using an energy-efficient ventilation system.