Buying an energy-efficient home could do more than just reduce your household bills. For some buyers, it can also unlock a cheaper mortgage – potentially saving thousands of pounds.
When Londoner Tom Andrews decided to swap renting for home ownership, he expected to gain more space and the security of having a place of his own. What he hadn’t initially appreciated was how much his new-build home’s energy efficiency could affect borrowing costs.
After seven years of renting in the capital, Tom and his partner bought a three-bedroom penthouse at the Berkeley development, Bow Green, East London. At more than 1,300 sq ft, their new apartment is more than twice the size of the 650 sq ft property they had previously been renting for £2,865 a month.
Crucially, buying an energy-efficient new home also meant they qualified for a green mortgage.
Green mortgages reward buyers of more energy-efficient properties, usually those with high Energy Performance Certificate (EPC) ratings.
For Tom, the difference was significant. With a 50% deposit, he secured a two-year fixed green mortgage at 3.83%, giving him monthly repayments of £2,572. The lowest comparable standard mortgage available to him at the time was 5.7%.
On those figures, the green mortgage is expected to save him nearly £15,000 in mortgage payments during the first two years compared with taking the standard-rate deal.
His monthly mortgage payment is also around £293 lower than the rent he and his partner were previously paying – despite their new home being more than twice the size.
Beyond the financial benefits, Bow Green also offered Tom a significant lifestyle upgrade. Set within five acres of landscaped green space, the development combines city living with a strong emphasis on nature and biodiversity, something that particularly appealed to Tom, who has a keen interest in conservation. Residents also benefit from a range of facilities, including two swimming pools, a gym, co-working spaces, a private cinema and a concierge service. With opportunities to meet neighbours through shared amenities and resident activities, alongside convenient connections to Canary Wharf and central London, Bow Green offers a balance of green space, community and urban convenience.
Why greener homes can attract cheaper finance
Green mortgages remain a relatively small part of the wider mortgage market, but the choice has expanded substantially. They typically target homes with strong energy-efficiency credentials, with many lenders focusing on properties rated EPC A or B.
The logic is straightforward: an energy-efficient home should generally require less energy to heat and run, potentially reducing household costs. Some lenders are prepared to recognise that through preferential mortgage products.
New-build buyers can be particularly well placed to benefit because recently constructed homes are generally built to more modern energy-efficiency standards.
However, a ‘green’ label does not automatically make a mortgage the best deal. Buyers still need to compare interest rates, product fees, cashback, loan-to-value requirements and the total amount repayable. Eligibility criteria also vary considerably between lenders.
For prospective buyers, it means the EPC may be worth looking at for another reason. Energy efficiency is no longer simply about reducing heating bills or environmental impact – it could also influence how much it costs to finance the home in the first place.
For further information, please visit: www.bowgreen.co.uk
