Half of mortgage lenders now offer cheaper rates for properties with top eco credentials

Home buyers looking to secure the cheapest mortgage might want to consider an energy efficient home, as half of all lenders now offer special ‘green’ rates. 

Energy efficient homes are typically those with an Energy Performance Certificate (EPC) rating of either an A or B.

EPC is a rating scheme which bands properties between A and G, with an A rating being the most efficient and G the least efficient. It is estimated that over half of the UK’s housing stock remains below a C rating.

While buying a poor EPC-rated home will typically result in higher energy bills, it could also prevent buyers from accessing some of the cheapest mortgage rates on the market. 

Just over half of mortgage lenders now offer better rates to those with A or B EPC ratings, according to broker Mortgage Advice Bureau.

Out of 6,776 mortgage deals across the entire market, 751 come with a green incentive, according to Moneyfacts data.

Lenders offer these in part because the government has previously considered giving them targets related to the average energy efficiency of the properties they lend on. 

Top of the class: Better mortgage rates are available for energy efficient homes – typically those with an Energy Performance Certificate of either A or B

What are the best green mortgage deals? 

Barclays recently announced a market leading 3.96 per cent five-year fixed rate ‘green deal,’ which comes with an £899 fee. 

It is only available to people buying a new-build home directly from the builder or developer, and the property must have an Energy Performance Certificate rating of A or B.

The lowest non-green equivalent is 4.06 per cent. On a £200,000 mortgage this could mean the difference between paying £1,063 a month and £1,051 a month.

While the 3.96 per cent rate is available to those buying with at least a 40 per cent deposit, lower priced ‘green’ options are also available to those buying with smaller deposits.

For example, someone buying with a 10 per cent deposit can fix for five years at 4.52 per cent with Barclays – also a best buy.

There are also superior shorter-term fixed rate options. For example, Danske Bank currently has a 3.97 per cent rate and £999 fee for home buyers and households in Northern Ireland. The property in question needs to have an EPC of between A and C.

Halifax is offering homebuyers £250 cashback when they buy property with an A or B rating.

It is also offering a green reward where borrowers can claim cashback for energy improvements up to £2,000 depending on what’s done.

For example, it’s possible to get £2,000 for installing a heat pump, £1,000 for solar panels or £500 for double glazing.

Existing Nationwide borrowers can take a green additional borrowing advance up to £20,000 with a 0 per cent rate for up to five years to make energy efficiency improvements.

Mark Harris, chief executive of mortgage broker SPF Private Clients, says: ‘It is difficult to quantify whether green mortgages are becoming increasingly popular among borrowers. 

‘Five years ago there were only a handful available but now many high-street lenders have a green mortgage range for energy-efficient properties or have a facility to provide cashback for retrofitting and upgrading properties to become more efficient.

‘Now the products are there, borrowers can benefit, which traditionally means a small discount on standard rates, usually by a few percentage points. 

‘Some lenders, such as Leeds Building Society, will also allow enhanced borrowing on applications where the property is more energy efficient versus less efficient properties.

‘However, while the deals are labelled green, it doesn’t necessarily mean that they are the most suitable products for a borrower. 

‘Cheaper rates or more suitable borrowing boundaries may be available elsewhere.’