Green Mortgages – Genuine money saver for “green” homes… or just a gimmick?

Banks can afford to lend as much as £45,000 extra on your mortgage and are “unfairly penalising” those of us who are energy-conscious. This according to experts at the UCL Energy Institute.

The experts say that borrowers buying energy efficient homes should be given bigger and cheaper mortgages, yet right now most banks are assuming yearly fuel costs of these homes to be the same as those with badly insulated, draughty properties that have inevitably higher gas and electricity usage!

RainCatcher Blog - Green Mortgages

That’s where “green mortgages” come in. The definition varies but the foundation tends to be consumers buying financial services that go toward benefiting the environment in one way or another – such as a mortgage offered to those buying a property constructed with sustainable materials, or to those taking action to ensure that their home is energy efficient with the likes of insulation products and energy efficient boilers.

Question: Should the mortgage offering be more all-inclusive to include flood water management?

Mortgage lending is big business and highly competitive – that combined with the rise of “green” initiatives these days it’s no surprise to hear that some banks and lenders are jumping on the idea. Ecology Building Society, for example, offer specialist mortgages for “unusual and innovative” energy-saving projects.

Question: RainCatcher product, anyone?

Getting a mortgage is one of the most important life decisions you can make and energy efficiency data may make that decision fairer and less costly. So, are these “green” mortgages something to take notice of, too restricting or just a gimmick?

RainCatcher Blog - Green Mortgages

The pros sound quite attractive. Improving your home with energy-efficient upgrades you otherwise couldn’t afford. Buying an already energy-efficient house with a bigger mortgage to pay for it. Lower utility bills, the ability to borrow more and getting a better house without spending what you would with a conventional mortgage.

But critics warn that the lending of extra money on such homes could backfire and fuel unfair practices by banks, penalising buyers who realistically can only afford to buy run-down homes. Case in point, Norwich and Peterborough Building Society, another “green” lender, only lend mortgages to customers whose properties meet a predetermined standard in energy efficiency – usually brand new houses built to housing efficiency standards.

As with any other mortgage product, you need to be cautious with your decisions. Just because a lender offers a shiny “green” one, it doesn’t necessarily mean that they themselves have ethical practices.

RainCatcher Blog - Green Mortgages

The cost of energy has rocketed in recent years as we’re all well aware and naturally we’re looking for ways to reduce our spending. Some “green” lenders are knocking off a percentage of interest rates each time home owners move up one energy grade on their Energy Performance Certificate (EPC) rating, while offering discounts if money is borrowed specifically for energy-saving means. The trend may only get bigger, but –

Question: Has the maintenance of such “unusual and innovative” products been taken into account, like in our why maintain your rainwater harvesting system blog earlier this month.

Also, like in our profit vs. social responsibility blog last time, the debate flares up again over motives for going “green”. In this case, should we change our habits not for a better mortgage but instead to be more eco-friendly and not just surrounding energy but water? Next week’s blog may also be of interest, which relates to replenishing the natural water table.

Doing so would, after all, put us on track to reduce bills, improve the environment, and perhaps benefit from a green mortgage as a bonus, if they take off.

RainCatcher wants you join in the discussion once again! Does a green mortgage sound appealing to you? What would make you switch to one and what would you like to see included? Let us know on Twitter or LinkedIn.