Improving Energy Performance On Homeowners Properties & The Green Mortgage Scheme

Making improvements to your property’s energy efficiency is great for the environment and also helps reduce your energy costs. Each property in the UK has an energy efficiency rating which is a measure of the overall efficiency of a home. The higher the rating, the more energy-efficient the home is and the lower the fuel bills will be.

In connection to this, the Government has recently said, in its net-zero strategy – which sets out how the UK will deliver on its commitment to reach net-zero emissions by 2050 – that they are exploring plans to link mortgages to green home improvements.

Green Mortgage

The Government’s net-zero strategy and the green mortgage scheme

The net-zero strategy outlines a comprehensive economy-wide plan for how British businesses and customers will be supported in making the transition to clean energy and green technology.

Under the plans announced by the Government, homebuyers could be asked to carry out improvements to make their homes more efficient. The Government has also said that it will be working with mortgage lenders to support buyers and homeowners in improving the energy performance of their properties. This could include introducing a green mortgage scheme that would impose targets for lenders that would ultimately aim to help decarbonise the UK’s ageing property stock. It would be one of the most fundamental changes in the lending market since the 2008 financial crisis.

However, the concept of a green mortgage is not a new one.

What is a green mortgage?

A green mortgage is a UK mortgage that offers a property buyer a preferential deal if they buy an environmentally-friendly home or, make energy-efficient home improvements to their property.  There are three main types of green mortgages available, which are:

  • Mortgages that offer a lower interest rate;
  • Standard mortgages that offer cashback; and
  • Mortgages that offer cheaper rates or cashback when people make energy efficiency improvements to a property

Certain lenders, such as NatWest and Barclays, have already introduced green mortgage products offering a discounted interest rate on homes that have energy-efficient ratings of A or B. Halifax is another lender that offers a £250 cash-back incentive to customers buying the most energy-efficient homes.

Green mortgages are generally associated with and available on new-build homes. However, they are also available for properties that have been renovated to meet high-efficiency standards. Every UK home is given an Energy Performance Certificate (EPC) when it is first built, sold, or rented. The certificate provides a property with an energy efficiency rating from A (most efficient) to G (least efficient). It is valid for ten years.

What are some of the energy-efficient improvements I could make to my property?

As a property buyer or owner, there are certain changes you can make to your home in order for it to become more energy-efficient and for you to be eligible to apply for a green mortgage:

  1. Find an alternative to your gas boiler – All newly built homes will be banned from installing gas and oil boilers by 2025 and by 2035, the Government wants to see no new boilers sold. Installing an air source and ground source heat pump could be used as an alternative.
  2. Insulate walls, roofs, and floors – One of the most effective ways of cutting your home’s emissions is by reducing heat loss through insulation. According to BBC News, a third of heat is lost through the walls in an uninsulated home.
  3. Replace or adapt windows and doors – This will help reduce your carbon footprint. One option is to install double glazing. This helps with reducing heat loss.
  4. Draught-proof – This is one of the cheapest yet effective ways to save energy. Draughts are commonly found around windows, doors, and lofts. To stop drafts with a door, for example, use a letterbox flap/brush. It’s an effective yet low-cost way to keep the heat in your house.

Comment

Making the UK’s housing stock more environmentally friendly is vital if we are to meet climate change obligations. Whilst the Government’s green home scheme is a step in the right direction, it does raise concerns about the impact it will have on home buyers if lenders are not willing to lend on less efficient properties. This would subsequently impact poorer customers, who may struggle to improve their property’s energy efficiency rating.

The risk of not being able to meet the requirements of a green mortgage or having a home loan rejected could result in property owners having to spend a lot of money on improving their home’s energy efficiency. According to a study by Nationwide Building Society, the average cost of making energy efficiency improvements for a single property is around £8,100. However, for properties with an F or G energy efficiency rating, this amount increases to a rather substantial £25,800.  UK Finance, the leading industry body for financial services in the UK have said, banks and other lenders are committed to helping make sure customers are not left behind.

Green MortgageHow can Nelsons help?

Rachel Bushell is a Senior Associate and Conveyancer in our expert Residential Conveyancing team.

For further information regarding the subjects discussed in this article, please contact Rachel or another member of the team in DerbyLeicester, or Nottingham on 0800 024 1976 or via our online enquiry form.

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