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Can new-build investors save money with a green mortgage?

The number of lenders offering green mortgages for energy efficient homes is on the rise, and many lenders have options available for new-build investors, too.

Energy efficiency in our homes has become hugely important in recent years, through a combination of soaring energy costs making people more aware of the energy they are using, and a growing drive towards protecting the environment by creating less emissions.

In the UK, the energy output of residential properties is scored using an energy performance certificate (EPC), which gives the property a rating between A (the highest) and G (the lowest). It is this rating that many lenders are basing their green mortgage products on, offering incentives to borrowers.

This could be in the form of cashback for the borrower, or a preferable interest rate, and many new-build investors in particular are benefitting from green mortgage products due to the fact that the majority of the UK’s newly built homes are awarded an A or a B rating. This compares to the average rating of D for general housing stock.

New-build investors often choose the property type because of its high appeal for tenants – if the home will be let out – due to its offering of lower energy bills and a better standard of living than a draughty older property. However, green mortgages could be another selling point for new-builds.

More lenders hit the market

According to the latest study by Mortgage Advice Bureau, the number of lenders offering green mortgage deals has increased by 4% over the past year. Now, around 57% of all lenders offer these products to borrowers, and the range of deals available is growing.

A similar number, 59%, of those surveyed said that they believed these types of products targeting energy efficient properties would become a permanent fixture in their product range, demonstrating that interest in energy efficient homes, including from new-build investors, is set to remain.

A big part of this shift, says Ben Thompson, deputy CEO of Mortgage Advice Bureau, is linked to environmental awareness. From an investment point of view, this is something else that new-build investors can consider as a selling point when marketing their energy efficient property to prospective tenants.

“Climate change is an issue we all must act on, and the uptick in green mortgage products on the market is encouraging news,” he says.

“It’s important that this shift stays front of mind for both the industry and property owners, as energy bills and what we can do on an individual level to reduce our climate impact stays firmly in the spotlight.”

New-build investors should consider green mortgages

The fact that more and more lenders are adding to their green mortgage product ranges demonstrates the growing interest in this option among buyers, homeowners and investors.

Alongside new-builds, green mortgages are also offered to those who purchase older, poorly rated properties and upgrade them in order to improve their EPCs.

New-build investors might be able to apply for a green buy-to-let mortgage with a number of lenders, but it’s worth shopping around or employing the services of a specialist mortgage broker to help you find the best option.

It’s not just limited to the specialist mortgage space, either, as a number of mainstream lenders offer green buy-to-let mortgage options for new-build investors, such as Barclays and NatWest. Paragon Bank, Shawbrook, The Mortgage Works, LendInvest and Landbay all offer green mortgage products for buy-to-let, too.

With mortgage costs being a major factor for both homeowners and investors right now due to some steep rises over the past couple of years, saving money or getting cashback through taking out a green mortgage could make a big difference to the borrower’s bottom line.

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