Green mortgages and EPC-linked rates
A green mortgage rewards an energy-efficient property, usually one with an EPC of A or B, with a slightly lower rate, cashback on completion, or a more generous affordability calculation. The mortgage itself is otherwise conventional. The discount is normally small relative to the difference between lenders, so a green product is best treated as a tiebreaker between comparable deals rather than a reason to choose an otherwise expensive lender.
The three forms the benefit takes
- A lower rate. A small reduction against the lender's equivalent standard product for the same loan-to-value.
- Cashback on completion. A one-off payment, which can be worth more than a rate discount on a smaller loan or a shorter fix.
- More generous affordability. Some lenders allow slightly higher borrowing on efficient homes, on the basis that running costs are lower.
Do the arithmetic before choosing on green alone
The spread between the cheapest and most expensive lender for the same case is usually larger than any green discount, so it is entirely possible to pay more overall by chasing one. Compare the total cost over the fixed period, including the arrangement fee, and use the green benefit to separate two products that are otherwise close. Cashback in particular is worth converting into an equivalent monthly figure before comparing, because a lump sum flatters a short fix.
If you are improving the property
Retrofit-linked products are a separate category from green mortgages on already-efficient homes: additional borrowing funds the work and the benefit applies once the improved EPC is evidenced. Evidence requirements are stricter and timing matters, so it is worth confirming what will be accepted before starting work rather than after.
On the policy direction
UK policy has been moving toward higher minimum energy efficiency standards, most directly for rented property, and the specific requirements and dates have changed more than once. That is a reason to check the current position rather than to act on a remembered figure. For a home you live in, the practical effect today is on the products available to you rather than on any obligation to upgrade. This page is information, not advice.
Common questions
What actually makes a mortgage green?
A green mortgage rewards the energy efficiency of the property, usually measured by its EPC rating. The reward takes one of three forms: a slightly lower rate, cashback on completion, or a larger borrowing allowance in the affordability calculation on the basis that running costs are lower. The underlying mortgage is otherwise conventional.
What EPC rating do I need?
Most green products key off an EPC of A or B, which in practice means newer or substantially retrofitted homes. Some lenders extend benefits to C, and some run separate products for retrofit work rather than for the property as it stands. Check the specific product, because the threshold is the single biggest variable.
Is the discount actually worth it?
Sometimes, and it is worth doing the arithmetic rather than assuming. A green discount is typically small relative to the spread between lenders, so a green product from an expensive lender can easily cost more than a standard product from a cheap one. Compare the total cost over the fixed period, including fees, and treat the green element as a tiebreaker rather than the deciding factor.
Can I get one for a property I am improving?
Some lenders offer retrofit or improvement-linked products, where additional borrowing funds efficiency works and the benefit is applied once the improved EPC is evidenced. These are different from a green mortgage on an already-efficient property, and the evidence requirements are stricter.
Does the EPC rule change affect me?
The policy direction in the UK has been toward higher minimum efficiency standards, particularly for rented property, and proposals in this area have changed more than once. Because the requirements and dates have moved, check the current position rather than relying on a figure you remember. For a home you live in, the practical effect today is on what you are offered rather than on any obligation to upgrade.
Does a poor EPC stop me borrowing?
Not in itself for a residential purchase. A very poor rating can affect a valuer's view or a landlord's ability to let a property under minimum standards rules, but an ordinary home purchase is not blocked by a low EPC. It simply means green products are not available.
If the property is a rental, see buy-to-let mortgages, where minimum efficiency standards bite hardest.
Founder, MortgageExplained
Adam spent over eight years as a mortgage adviser at Just Mortgages, with further experience in commercial finance. He is CeMAP and CF qualified. He built MortgageExplained to do one thing well: explain mortgages in plain English, so you know where you stand before you speak to a regulated broker. Every page on the site is written by Adam.
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