The potential of the green mortgage market


“It’s still early days for the green mortgage market but as we all know mighty oaks from little acorns grow.”




June started with World Environment Day, and at such a time, it seems apt to consider the potential of the mortgage market which has generated a raft of activity in recent weeks, resulting in plenty of attention from homebuyers, landlords and intermediaries.

The environment and climate change are issues which remain high on the government’s agenda. This includes a strong focus on the housing market and how it can become more sustainable. Looking forward, the government is aiming to support as many homes as possible to reach an energy efficiency rating of C or better by 2035, with an earlier target of 2030 set for private rented homes throughout England and Wales.

However, analysis by Rightmove – which was said to cover over 15 million homes across England & Wales – 59% of homes have a D, E, F or G rating across England and Wales and there is the potential for this to be reduced to 11% of homes if recommended improvements were made. However, just under 1.7 million homes do not have the potential to improve higher than an EPC rating of between D and G, which means that the government may have additional work to do to support these households to turn their ambitions into a reality.

In addition, the study outlined that an estimated 11 million homes in England and Wales do not yet have an Energy Performance Certificate rating. The most likely reason for this being that they have simply not been sold or let out since the certificates were introduced. To help underline people’s growing appetite and drive for more energy efficient homes, further research from Rated People discovered that demand for eco-friendly home improvement jobs increased by a massive 41% in the run-up to 2021 and more than half (57%) of UK residents saying they wanted to find ways to be more eco-friendly in the future.

As underlined by these studies, reducing the carbon footprint and energy bills are measures which a rising proportion of homeowners are considering when it comes to both existing and new properties. The concept of sustainability is also slowly but surely coming to the fore. These factors act as a further incentive to pay closer attention to a property’s current EPC rating and this is something which lenders are also considering when it comes to their product portfolios.

Green products are evolving to take low product fees and cashbacks into account so they can be effective for those homeowners who have secured a good EPC rating over the past 24 months. As a lender, we entered the green mortgages arena to provide additional options for homebuyers and landlords and to reward those who have made energy efficient improvements to their homes.

Generating stronger levels of competition and offering easier access to a variety of products is vital in raising the profile of green mortgages and the awareness around how borrowers can benefit. As such, it’s great to see many different lenders grasping the opportunities on offer to extend their product ranges accordingly and responsibly. It’s still early days for the green mortgage market but as we all know mighty oaks from little acorns grow.