Nicola Goldie, Head of National Accounts
Eco-friendly mortgage availability has been boosted in the first quarter of 2021, and this is only the start
Any mortgage that funds a sustainable purchase or improvement to make a home more environmentally friendly is considered green.
Some lenders may offer rewards for customers taking out a Green mortgage. That could be anything from a lower rate of interest to the ability to borrow more, or the chance to receive cashback. Ultimately lenders are recognising customers who are making greener choices. The mortgage market is inclusive of Buy to Let lending too, making it more accessible across a wider range of customers.
The main types of green mortgage that are available allow customers to purchase and remortgage homes with an A or B energy efficiency rating, or to fund green home improvements through additional borrowing.
The Government’s Net Zero by 2050 target is a big driver of environmental change. It also announced in April that it plans to cut carbon emissions by 78% by 2035 compared to 1990 levels.
The housing and construction industries have a large carbon footprint and therefore a big job to do. There’s a tangible change in pace this year and a collective impetus across the whole housing industry to address the problem, in particularly the lending sector.
The mortgage market is playing its part, making it cheaper to release capital to fund eco-friendly home improvements and cheaper to buy an A or B-rated new home.
There’s another reason for the surge in green mortgage deals. Growing demand from consumers is taking these products from the edges of the market into the mainstream.
A recent IMLA survey (232kb pdf) showed that three quarters of lenders expect demand for green mortgages to grow over the next few years and 14% of brokers have clients who have enquired about or taken out a green mortgage.
Who offers them?
According to Defaqto there are now over 25 green mortgage products available, a sharp rise compared to the handful available a year ago.
Most notable is the entrance of large high street banks into the eco-friendly mortgage market, which used to be the preserve of a few smaller lenders and building societies.
At Virgin Money we’re taking green mortgages seriously as part of our wider environmental commitment.
We offer Greener Mortgages to borrowers purchasing a new build home with an Energy Performance rating of A or B. They come with a choice of cashback options plus borrowers can buy the properties through the Help to Buy scheme.
Plus, we’ve partnered up with Carbon Neutral Britain and for every Greener Mortgage that completes, we will fund environmental projects, such as the development of wind, solar and hydro renewable energy. The funding will offset the equivalent of the average UK home’s carbon emissions for an entire year*.
Together, we’re also aiming to plant 100,000 trees from the sale of our Greener Mortgages.
What should brokers do?
Familiarise yourself with the new green mortgages on offer across the market, so you’re confident advising your clients about which best suit their needs.
Explain the financial benefits of buying a home with an A or B EPC rating compared to a lower rated property. Tell clients not only about the environmental impact but how it will affect their ongoing energy bills.
If a client wants to raise capital to fund home improvements find out more about their plans and whether they will increase the energy efficiency of their home. They may qualify for a green remortgage.
For more information on Virgin Money’s Greener Mortgages, visit our website. If you’ve got any questions, you can get in touch with your Business Development Manager or dedicated Regional Service Team.
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