Green Mortgages

Green Mortgages in the United Kingdom

Green mortgages, also known as ethical or sustainable mortgages, are better for the environment. Although currently only offered by a few mortgage lenders, green mortgage loans are becoming more popular.

The environment is currently high on political agendas and in public consciousness, but how much good can a green mortgages really do?

A Green mortgage, aims to reduce negative impact on our environment. The lenders that offer this package will often make contributions to charities that support the environment or the welfare of the less fortunate. Some will only finance houses that are seen to be environmentally sound.

In addition to this most lenders will not work with businesses that are known to pollute or damage the environment in any way.

Five mortgage lenders currently offer a ‘green mortgage’ package:

• The Co-operative Bank,
• The Norwich & Peterborough Building Society
• The Ecology Building Society
• The Hanley Economic Building Society
• Teachers Building Society

One thing that all these lenders have in common is that they all support reforestation schemes, so when you take out mortgages with them, you know that you are helping the environment.

Mortgage brokers are also following suit:

• London & Country Green Mortgages: London & Country are a no-fee broker who offer green mortgages without any gimmicks attached. L&C pledge to plant 50 trees every time someone takes out a mortgage.

What is a green mortgage?

A green mortgage is a home loan that is beneficial to the environment. This can be in several different ways, and to different extents. Some lenders provide green mortgages by planting a certain number of trees per loan, thereby offsetting its carbon footprint. Other green mortgages will only be lent on those houses that have an ethical/sustainable direction. Furthermore, some green lenders will donate towards the environment on behalf of the borrower.

How does a green mortgage benefit the environment?

The ways in which green mortgages benefit the environment depends on the nature of the lender and the loan product. Some green lenders will lend on ethical properties – for instance those built with sustainable materials, those that are energy efficient, or those that offer an ecological payback. Other green lenders make their mortgages green by donating to the environment on the behalf of the borrower, or planting trees on behalf of the borrower.

Are there many green mortgage lenders and how do their green loans differ?

The number of mortgage lenders who offer green mortgages remains low. There are three principal green lenders: the Co-operative Bank, the Norwich & Peterborough Building Society, and the specialist mortgage lender Ecology.

The Co-op make a direct donation to Climate Care (a charity investing in offsetting carbon emissions), although this has been cynically reviewed by some experts who claim it is too expensive. Norwich and Peterborough, another lender with a green aspect, aims to offset the carbon emissions of its borrowers through planting trees, in close association with the Carbon Neutral Company.

Could I borrow on a green mortgage to start a smallholding or buy renewable energy?

Ecology Building Society, perhaps the greenest of the mortgage lenders, will only lend on properties providing environmental benefit, including organic smallholdings and farms. Ecology fills a niche in the market, and borrowers can even reduce their headline rate by borrowing money to install energy efficiency measures such as renewable energy systems.

Could I save money by being green with my mortgage and house?

Although the answer is yes in many cases, it is up to the individual to decide whether or not their environmental actions are best taken on their mortgage loan.

Is the green mortgage loans market likely to grow?

With environmental concerns at the forefront of political agendas and public consciousness, it is only a matter of time before other companies start to offer ethical, sustainable and green mortgages.

Can I save money on my loan, or am I paying to be green?

This depends on the broker you choose, your individual circumstances, and the type of loan you are interested in. For instance, if you are thinking of a renewable building project involving entirely sustainable materials, it may be that a green loan from a building society like Ecology is your cheapest and best option. Most green mortgage loans on the market appear to be competitive, although some experts urge borrowers to shop around, find the cheapest headline rate, and then invest your savings into the environment.

Could I save money by making my house more green and energy efficient?

Absolutely, energy efficiency is the key to cutting down bills. At its most simple, you can lose heat from hundreds of different areas around the house. Whether your energy efficiency measures are as simple as insulating your loft, you could save money almost straight away. Please see the Mortgages.co.uk guide to energy efficiency. Click here for a free, no-obligation mortgage enquiry form.

Additional benefits

Often you will be able to take out a package, where your household emissions and energy usage will be monitored, therefore you can benefit from the knowledge that you are causing less damage to the environment, and you can save money on you electricity/gas bills!