Apart from new homes being better insulated and having a load of other benefits helping you save money on bills whilst keeping you warm compared to most older homes, there is also a significant benefit to buying New with a "Green Mortgage". We have asked Mortgage Light for their insight.
What are green mortgages?
It may surprise you to know that around 20% of UK carbon emissions come from energy use in our homes. With this in mind, an increasing number of mainstream lenders are offering green mortgages to encourage us to invest in energy-efficient homes in a bid to lower our carbon footprint and to protect the environment. Green mortgage lenders offer incentives to new build buyers when purchasing a property with an EPC (Energy Performance Certificate) rating of ‘B’ or above. There are also green mortgages available on existing homes when the owner improves the EPC rating. See more about EPC ratings on the gov.uk website.
What is a PEA?
Energy ratings on new build homes are assessed slightly differently to those of existing builds. New build homes don’t have an existing EPC as this can only be recorded once a home is built, so that’s where the PEA (Predicted Energy Assessment) rating comes in. In essence, PEA provides a prediction of what the property’s energy rating will be.
What could a green mortgage mean for me?
If you’re moving into an energy-efficient home or making your existing property greener, there are lenders that will reward you with a better interest rate, more favourable terms or cashback on your mortgage.
Green mortgages and new build homes
Major lenders such as Barclays, Halifax and Nationwide all offer green mortgages on new build homes with a PEA rating of ‘B’ or above. Lenders will need to see proof of this to check the home buyer is eligible for a green mortgage - they may also stipulate that the new build property is bought directly from the developer.
Can I get a green mortgage on a buy-to-let property?
As with new build green mortgages, lenders are supporting landlords with favourable rates on green mortgages for BTLs too. This isn’t restricted to new build buy-to-lets either; lenders are also offering incentivised mortgages on existing properties where the landlord improves the EPC of a property to a ‘C’ rating or above.
EPC requirements for BTLs – what’s changing?
Strict EPC regulations not only apply to new build properties; existing BTL properties also have to adhere to EPC requirements and there are changes on the horizon. These changes are all linked to climate change and the UK government’s target for net zero carbon emissions by 2050. To put things into perspective, it’s estimated that currently around 40% of rental properties have an EPC rating of ‘D’ or lower, so it’s no surprise there’s a huge push to improve the UK’s EPC ratings and therefore our carbon footprint.
Here’s a summary of what’s going to change and when:
- Since 2018 landlords have had to ensure their tenanted properties have an EPC rating of ‘E’ or above. And there’s a penalty of up to £5,000 in place for landlords of those properties that do not meet the requirements.
- This requirement is set to change again in 2025, with all new tenancies required to have a valid EPC rating of ‘C’ or above.
- From April 2028 the requirement to have a valid EPC rating of ‘C’ or above will be applied to all existing tenancies too. The penalty will rise considerably to £30,000 for landlords of properties that do not comply with the EPC rating or don’t have a valid exemption. This is to encourage landlords to make EPC improvements as swiftly as possible.
When is a BTL property exempt from the changing EPC rating regulations?
If the work required to bring a property up to the required EPC rating exceeds £3,500 then a landlord may qualify for a high-cost exemption. Under the proposed changes in 2025, a landlord may qualify for a high cost exemption if improvements exceed £10,000.
Good for the planet and better for you
Whatever your stance on climate change, you’re likely to be aware of the impact we’re all having on the planet. So if you’re planning to buy a new build home, it’s important to consider buying from a reputable eco-conscious developer.
Lodge Park Homes strive to do everything we can to help care for the planet. That’s why we’re proud to be a new build company that is able to support green mortgages. We know that, by creating energy-efficient homes, we can reduce the amount of heat lost and the demand for energy, therefore saving you money and reducing carbon. And what’s more, energy efficient homes are more comfortable, keeping you warm in the cold months and cool when it's hot outside. When you purchase one of our modern, eco-friendly homes, we’ll supply you with a PEA which you can show to your lender should you choose to apply for a green mortgage.
If you’re looking to purchase a new build home and like what you’ve read about green mortgages, Mortgage Light is just a phone call away. For friendly, professional advice on the right mortgage for you, simply give them a call on 01908 697 655 or visit www.mortgagelight.co.uk
