Green mortgages go mainstream in 2021

26 April 2021

Mainstream lenders including Barclays, NatWest and RBS are now including green mortgages in their ranges.

More lenders are offering special mortgage deals for those who buy environmentally sustainable homes, according to independent financial information experts Defaqto.

So-called ‘Green’ mortgages are designed to offer borrowers preferential terms to buy a property that meets certain environmental standards. This will often be a new-build property that has a high energy efficiency rating, but they can also be used for properties where they have been renovated to improve their environmental performance. Generally, properties with an energy efficiency rating of A or B are eligible, although Foundation Home Loans has a range of products for homes with a rating of C or above.

Green mortgages are not new, but it is only this year that they have really taken off with several mainstream lenders now entering the market. Today there are 26 green mortgage products available, compared to only a few products available a year ago.

The current best buys compared to standard products[i]:

 2 Year Fixed Rate

Green mortgages

       

LTV

Provider

Product

Initial Rate Payable

Fees Payable

Cashback Incentive

60%

NatWest

2yr 1.13% Fixed LTV 60% Green

1.13%

£995

£250

75%

NatWest

2yr 1.38% Fixed LTV 75% Green

1.38%

£995

£250

85%

NatWest

2yr 2.49% Fixed LTV 85% Green

2.49%

£995

£250

90%

Barclays

2yr 3.62% Fixed LTV 90% Green

3.62%

0

0

           

Non-green mortgages

       

LTV

Provider

Product

Initial Rate Payable

Fees Payable

Cashback Incentive

60%

First Direct

2yr 1.24% Fixed LTV 60%

1.24%

£490

0

75%

Halifax

2yr 1.31% Fixed LTV 75%

1.31%

£995

0

85%

Newcastle BS

2yr 2.65% Fixed LTV 85%

2.65%

0

0

90%

HSBC

2yr 3.29% Fixed LTV 90%

3.29%

0

0

5 Year Fixed Rate

Green mortgages

       

LTV

Provider

Product

Initial Rate Payable

Fees Payable

Cashback Incentive (£)

60%

NatWest

5yr 1.28% Fixed LTV 60% Green

1.28%

£995

£250

75%

NatWest

5yr 1.64% Fixed LTV 75% Green

1.64%

£995

£250

85%

NatWest

5yr 2.82% Fixed LTV 85% Green

2.82%

£995

£250

           

Non-green mortgages

       

LTV

Provider

Product

Initial Rate Payable

Fees Payable

Cashback Incentive (£)

60%

Santander

5yr 1.27% Fixed LTV 60%

1.27%

£999

£250

75%

Clydesdale Bank

5yr 1.53% Fixed LTV 75%

1.53%

£999

0

85%

Leeds BS

5yr 2.73% Fixed LTV 85%

2.73%

£999

0

With green mortgages, some lenders are offering additional incentives such as £250 cashback. Foundation Home Loans is offering borrowers £750 cashback, although its rates are higher than those featured in the best buy tables above and are available to re-mortgage only.

Katie Brain, Banking Expert at Defaqto, comments:

“It is encouraging to see more mainstream lenders entering the green mortgage market and offering borrowers more choice. It can cost a lot to make a property more environmentally sustainable and it is great to see some benefits for those who buy them. Most new homes will be eligible for these deals but older properties that have been renovated to achieve a high energy efficiency, may also fit the criteria.  

“Anyone buying a property with an energy efficiency rating of A or B, would be wise to consider all their borrowing options to get the right product for them. They should look at all the features, such as the interest rate and introductory deal period, as well as any upfront incentives, to make sure they get the right product for them. An independent financial adviser can help with this.”

Buying a home is a huge investment and Defaqto recommends that all those looking to get a mortgage seek professional advice to get the right product for their individual circumstances.

Product data taken from Defaqto Matrix on 22 April 2021

ENDS

[i] There are 2 lenders who offer green mortgages which are only available in NI (AIB and Progressive BS), which have been excluded as they are not widely available.

Contact information

SEC Newgate: Vanessa Chance, defaqto@secnewgate.co.uk

Defaqto: pressoffice@defaqto.com

About Defaqto:

Defaqto is a leading financial information, ratings and fintech business. Its unbiased fund and product information provided as expert ratings, coupled with its market-leading software solutions helps consumers, financial institutions and financial advisers make better informed financial decisions.

Defaqto has been operating for over 25 years and works independently. Defaqto employs over 60 analysts spending 400 hours a day monitoring the market and analysing more than 43,000 financial products and funds in the UK, ensuring that the information provided is accurate and up to date.

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Star Ratings allocate a product or proposition a rating of 1 to 5, depending on the quality it offers. With a 4 or 5 Star Rating indicating the most comprehensive offerings in the market.

Available through Defaqto.com and Defaqto’s financial planning software, Engage Core, Defaqto Star Ratings provide an independent and unbiased industry standard for indicating where a product sits in the market in terms of feature quality and comprehensiveness. Consumers and financial advisers alike can see, at a glance, how comprehensive a financial product is.

Access further information about Defaqto at defaqto.com

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