How home improvements could help you get a better mortgage deal

Green mortgages offer homeowners a preferential deal if they make energy-efficient improvements to their home. We’ve asked the property advice website HomeOwners Alliance to tell us how green mortgages work and what changes are afoot.

Green mortgages reward you for having a more energy-efficient home. They will either offer you a better, lower interest rate or a cashback when you buy a new energy-efficient home. And if you’re remortgaging, a green mortgage will give you a better rate or cashback if you plan to undertake energy efficiency improvements.

So if you’re remortgaging to pay for home improvements that will include energy-efficient features, a green mortgage product could be a good idea.

Banks that already offer green mortgages include Barclays, NatWest, Virgin Money and Nationwide. Each lender will have its own terms and conditions. A mortgage broker can help you find the right green remortgage product for you.

For example, Nationwide has a ‘Green Additional Borrowing’ mortgage; to qualify, you must spend at least 50% of the money on home improvements to make your property more energy-efficient. Their 2 Year Fixed Green Additional Borrowing mortgage has a rate of 0.99% with no product fee. This compares to the lender’s regular 2 Year Fix rate for additional borrowing of 1.34% with no product fee.

What types of improvements can be made with a green mortgage?

Lenders’ requirements will differ. But under Nationwide’s ‘Green Additional Borrowing’ mortgage, acceptable green projects include solar panels, air-source heat pump, cavity wall insulation, double glazing/replacement windows, electric car charging point, ground source heat pumps, loft insulation, small scale wind turbine, tanks and pipes insulation.

If you want to extend your borrowing with a green mortgage to pay for energy efficiency home improvements, lenders will ask for details of the project(s) you want to do. So, you’ll need to get at least three quotes from an appropriate tradesperson as soon as possible. Don’t forget to include all the costs, including painting, decorating, and even VAT.

Government plans to make our homes more energy efficient

If you think green mortgages are a bit of a niche product, then you might be surprised to learn that last year the government said it was considering targets for banks to ensure that most of their lending went to homes with an average EPC band C by 2030.

While a good EPC rating for our homes will help us pay less on our energy bills, there aren’t yet any laws requiring homeowners to reach a particular rating. However, in the rental market, things are about to change. At the moment, any property being rented must be at least EPC band E. But the government has increased this to a minimum of a C rating for new tenancies from 2025. And for all rental properties (even those with long-standing tenants in place) by 2028. This means landlords will need to spend thousands on home improvements. Could homeowners be expected to follow suit?

Whatever the government decides, it’s a good idea to get your home in as good an EPC position as possible. Start by finding a tradesperson you can trust.

And if you don’t have an up-to-date EPC on your property, you can find an EPC assessor via Checkatrade here.

For more information, visit the HomeOwners Alliance website or read their full guide on Green Mortgages.