Glossary · UK
What is Green Mortgage?
A mortgage that offers a preferential interest rate, cashback or a larger borrowing amount to buyers of highly energy-efficient homes, or to homeowners making green home improvements.
Full Definition
A green mortgage is a mortgage product that gives a financial incentive -- typically a lower interest rate, cashback, or in some cases a higher maximum loan amount -- to borrowers buying or remortgaging a property with a strong Energy Performance Certificate (EPC) rating, usually band A or B, or in some product ranges C. The rationale for lenders is twofold: energy-efficient homes tend to have lower running costs, which can support affordability, and lenders themselves increasingly report and manage the average energy efficiency of the properties in their mortgage book as part of climate-related financial disclosures. A second type of green mortgage, sometimes called a "green further advance" or retrofit product, is aimed not at the property's current rating but at funding energy efficiency improvements -- such as loft or cavity wall insulation, double glazing, or a heat pump -- often at a preferential rate, and can sit alongside a grant such as the Boiler Upgrade Scheme, which offers up to £7,500 towards a heat pump installation, rather than replacing it. Borrowers should compare the headline rate and any product fees on a green mortgage against the best standard rate available on the open market, since the "green" discount is not always the cheapest deal overall, and should check the specific EPC band or improvement works required to qualify, as these vary significantly between lenders.