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27 Feb 2024

Green mortgages

Find out about the types of green mortgage, which banks offer them and whether they're worth considering

Stephen Maunder

In this article

Types of green mortgages
Which lenders offer green mortgages?
Are green mortgage rates competitive?
How green really are green mortgages?
Alternative ways of funding green home improvements

If you’re buying a new-build home or are planning to make energy-efficient improvements to your property, a ‘green’ mortgage might be worth considering.

Types of green mortgages

There are two main types:

For buying or remortgaging an energy-efficient home: these mortgages are usually available to people buying or remortgaging properties with Energy Performance Certificate (EPC) ratings of A or B. Lenders offer small reductions on their standard mortgage rates or cashback incentives.
For green home improvements: these deals are available to homeowners making energy-efficient home improvements, such as replacing a gas boiler with an air source heat pump. Lenders will either offer a reduced rate on the extra money you borrow, or cashback or a lower mortgage rate as a reward after the work is complete.

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Which lenders offer green mortgages?

The green mortgage market has grown significantly in the past few years, rising from just four products in 2019 to more than 60 in August 2023, according to data from the Green Finance Institute.

But green deals remain a very small proportion of the overall mortgage market. The following banks and building societies offer deals:

Bank/building society	Lower rates/cashback for energy-efficient homes	Cheaper additional borrowing for green home improvements	Lower rates/cashback after you make green home improvements
AIB (Northern Ireland)	✔
Barclays	✔		✔
Coutts	✔	✔
Coventry Building Society		✔	✔
Chorley Building Society		✔
Danske Bank	✔
Dudley Building Society	✔	✔

Note: Data from the Green Finance Institute, correct as of August 2023. Doesn't include mortgages that are only available on buy-to-let properties or lifetime mortgages.

Are green mortgage rates competitive?

Green mortgages for energy-efficient homes

Participating lenders usually offer small reductions on their standard mortgage rates. Green mortgage rates are often around 0.1% or 0.15% below the lender's standard rate.

These green rates may be the cheapest a specific lender offers, but green mortgages are rarely market-leading overall.

In many cases, the same or better rates will be available elsewhere on a standard mortgage.

This means you should still shop around - don’t assume a mortgage is cheap just because its rate has been reduced.

Find out more: best mortgage rates currently available

Green mortgages for additional borrowing

These deals tend to be more attractive, but banks only offer them to existing customers.

Lenders that provide this type of green mortgage tend to offer additional borrowing rates well below the cheapest personal loan rates, and some even offer interest-free additional borrowing for specific renovations.

So if you’re thinking about making green improvements, it’s worth looking into whether your lender offers a preferential rate.

Find out more: home improvement advice from Which?

How green really are green mortgages?

It’s important to note that these mortgages aren’t ‘green’ in themselves. They are offered by a range of lenders, and neither the bank nor the mortgage is required to conform to any environmental, social or governance (ESG) criteria.

Instead, green mortgages either incentivise you to buy an energy-efficient home, or make it more cost-effective to make energy-efficient improvements to your current property.

The outcome should be a home that is cheaper to run and has greater appeal when you come to sell it.

Find out more: Britain's greenest banks revealed

Alternative ways of funding green home improvements

Green mortgages are an alternative to some of the more conventional ways of funding home improvements, such as using savings, taking out a personal loan or using a 0% credit card.

There are some other grants available if you want to make specific energy-efficient improvements, such as upgrading your boiler or adding insulation to your home.