FT Logo

Copy article

FT Editor Banner

Green mortgages for first-time buyers

Journalist: Tom Dunstan, FTAdviser

ended 09. July 2024

Recently, it as been argued that, with energy efficiency and sustainability fast becoming an essential factor when buying a new property, green mortgages are a “great way for buyers to be rewarded when purchasing an efficient home”.

This follows a recent case study of couple Georgia and Molly who recently purchased their first home in Sussex, putting down a 10% deposit of £41,500 .


“We started off on a high interest mortgage rate of 5.15% but after finding out we could change our rate up until the day we move in, we secured a much lower rate of 4.55%. Applying for a green mortgage definitely benefitted us financially, with a better overall rate, and with our reduction in energy bills, a new home was the best way forward for us,” Georgia said.

Alex Dowling, Head of Sales and Marketing at David Wilson Southern Counties, said: “Applying for a green mortgage hugely supports those making their first move by offering financial incentives to help keep costs down."

What is your opinion on this? Does Georgia and Molly's situation sound representative of other first time buyers? How useful are green mortgages for first time buyers in your opinion and experience?

7 responses from the Newspage community

Copy all

Copy

Editor
Ben Perks
Managing Director at Orchard Financial Advisers
Buying an energy-efficient property doesn't just save the planet, it could save you some pennies, too. There are a growing number of lenders that are offering preferential interest rates for 'green' homes. An energy-efficient property can often cost more than a normal home, and the increased price tag can deter first-time buyers. So, while better deals are available, this isn't something that many first-time buyers are able to take advantage of.
Copy

Editor
Stephen Perkins
Managing Director at Yellow Brick Mortgages
The rate changes mentioned were more likely down to rate reductions across the market over the past few months prior to their completion. Green Mortgages offer very little saving or benefit to borrowers in their current guise and I am yet to find anyone who purposefully selects their dream home based on green mortgage criteria.
Copy

Editor
Aaron Strutt
Product and Communications Director at Trinity Financial
Some lenders offer cheaper rates if you purchase an energy-efficient home, but not all. NatWest, HSBC and Halifax are the biggest lenders offering better deals when buying energy-efficient homes.
Halifax typically requires the property to have an Energy Performance Certificate of A or B or an Energy Efficiency Rating of 81 or higher to get the cheaper rate.

Now that mortgage rates are decreasing, more borrowers buying a home can switch products and take lower rates, particularly if they have larger deposits. They need to check the lender's websites or with their broker to ensure they get the best rates before they complete.
Copy

Editor
Simon Bridgland
Director at Charwin Private Clients
Market fluctuations aside and assuming these two rates had been researched at the same time, one green and the other not, when run over a 30 year term this would represent a monthly saving of nearly £140. The main take from this study is the difference in rate between two products for the same borrower, with the advantage being given only if the home you buy comes with the green label. This is easy to achieve with a new build home, but trying to achieve the same outcome on the 2nd hand market with its ageing stock can be costly and with no guarantees the desired outcome can be achieved. This then comes back to the issue of the types of new homes being made available by for profit developers. Are developers building enough starter homes that FTBs of the UK need and deserve, its doesn’t currently look that way. It is only week one of the new housing minister, Matthew Pennycook. Hopefully he wont just be another ineffectual, as per the last 16 in nearly as many years.
Copy

Premium
Mark Hosker
Mortgage Adviser at Cyborg Finance
Research Shows a home buyer would pay a £40,000 "green premium" when purchasing a home. As such the economic benefits from lower mortgages and energy usage can only be determined on a case-by-case basis, while the environmental benefits are calculable and significant.
Copy

Steven Morris
Advising Director at Advantage Financial Solutions
I am going to guess that the main reason Georgia and Molly's rate dropped whilst waiting to complete is because rates dropped on the whole. It so happened there was also a decent green product at the time. The price difference between regular and green mortgages are almost comically miniscule. Either you are looking at around 0.1% or some cashback : 250, £500, or at absolute best HSBC's stonking £1050 cashback. But when you consider that a mortgage costs ten's of thousands of pounds over a typical fixed rate, even £1050 isn't touching the sides very much. The idea that a green mortgage could shave 0.5% off your interest rate is just demonstrably untrue. These are misrepresented half truths, presumably spun to shift unsold new build stock.
Copy

Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
I don't think anyone ever bought a property, based purely on its EPC rating. Whilst we have seen a rise in "green" mortgages, these are little more than a small additional discount on the rate, or a cashback of a few hundred pounds. If they happen to be the best deal for a given property, then great, you get a slightly better mortgage deal than you would have otherwise; but no one is going to be basing their property search on securing one of these deals. You fall in love with a property and then, if you're lucky, it has an EPC that allows you to get a "green" deal, but it's luck not judgment in the vast majority of scenarios.