Threshold Mortgage Advice

Could energy improvements make your mortgage cheaper?

With Boris Johnson announcing new plans to install up to 145,000 electric car charging points in England each year, we look at the increasing role property developers and mortgage lenders are playing in motivating home buyers to adopt greener ways of living.

Tackling England’s climate crisis

After an intense climate change conference in which delegates entertained tough talks about our planet’s future, Boris Johnson has unveiled his latest initiative to make the country greener, with a law that states all new homes in England must be equipped with an electric car charging point.

As reported in BBC online, the new law, which is due to come into effect in 2022, would see up to 145,000 new electric vehicle charging points installed in new homes and buildings in England each year, with buildings undergoing renovations also required to comply with the law.

The initiative, which all new build property developers in England will have to adhere to, comes less than a decade before the proposed ban of new petrol and diesel vehicles in England, which is currently anticipated to take effect in 2030.

The move by the Government is the latest attempt to tackle growing concerns about climate change and reduce the impact of England’s carbon footprint, but it’s not the only area MPs need to target if we’re to have any hope of reaching the greater goal to be carbon neutral by 2050.

Why going green starts at home

Although the government’s latest climate initiative aims to tackle the emissions released by England’s road vehicles each year, there’s another huge contributor to our cumulative carbon footprint that needs to be addressed if we’re to successfully achieve carbon neutrality.

England’s homes are said to be among the worst emitters of carbon dioxide into the atmosphere, with the UK Committee on Climate Change estimating that £250 billion pounds needs to be invested in UK home upgrades by 2050, according to a report by the Green Financial Institute.

With this deadline looming ever closer each year, the government is looking to property developers and mortgage lenders to help support this target through incentives that motivate home owners to adopt greener measures.

Among these initiatives is the green mortgage. The rollout of the green mortgage was somewhat halted by the global COVID-19 pandemic and subsequent shutdown of the housing market. Now, with property sales once again buoyant, green mortgages are back on the table for those considering buying a new build property, a secondhand house or apartment, or remortgaging their home.

What is a green mortgage?

A green mortgage is a specific type of mortgage that rewards the borrower with more favorable terms if they purchase a home which is demonstrably energy efficient.

The reward typically entitles you to a better lending rate than you’d otherwise be offered, or a cash back incentive that sees you issued with a lump sum on completion of your home purchase.

Is it only new customers who can benefit from a green mortgage?

Not necessarily. Green mortgages are relatively new to market so many lenders are still developing their products and terms. That being said, you will find lenders who are extending their green mortgage borrowing criteria to existing homeowners who’ve improved their home’s efficiency by adopting greener measures in the time since their original mortgage was taken out.

How can I prove my home, or the home I’m purchasing, is energy efficient?

You can prove how energy efficient your home is with a certificate known as an EPC.

EPC stands for Energy Performance Certificate and it’s a mandatory requirement of every home being sold or rented in England. For the most part, you’ll find a property’s EPC included with its sales or lettings advert, so you can see how efficient your potential future home is, before you’ve even been inside to view the property.

What information does an EPC contain?

An EPC grades a property’s energy efficiency on an alphabetic scale that ranges from A (the best rating) to G (the worst rating). These bands also carry an equivalent numerical scale. To score A, for example, your property would have to achieve 92 points or above.

To calculate these scores an EPC takes into consideration things like the age of your home, the type of windows and doors it has, its radiators and insulation. Your EPC will give you two values. One for the current energy efficiency of your home. The other for its potential energy efficiency, were you to make the recommended improvements.

What EPC score do I need to qualify for a green mortgage?

Exact criteria for a green mortgage varies by lender, but for the most part your property will qualify if it scores an A grade, with many lenders also offering rewards for properties in the B band too.

As new build homes tend to represent the most energy efficient in the UK, these commonly meet the criteria for a green mortgage, while many older style character properties, such as those of Victorian, Tudor or Edwardian age, generally perform much lower in terms of energy efficiency.

If you believe the property you’re purchasing could meet the criteria for a green mortgage you should raise this with your mortgage broker at point of application. He or she can then investigate the green mortgage products available, to find you the most suitable product to meet your unique lending circumstances.

Contact Threshold today for more advice around green mortgages or taking out a mortgage on a new build home under a buying scheme.

Your home may be repossessed if you do not keep up repayments on your mortgage.

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