Barclays will launch the UK mortgage market’s first ever ‘green mortgage’, which will offer preferential rates for those buying an energy-efficient new build property. The green home mortgage will be available next week on properties with an A or B Energy Performance Certificate rating, while there will be 2 and 5-year fixed rate options to 90% loan-to-value.
The product is the first in the UK to give cheaper rates to those buying homes with an A or B EPC energy efficiency rating. The product will give discounted rates on two- and five-year fixed rates up to 90 per cent LTV and Help to Buy loans up to 75 per cent LTV.
Barclays says the savings could add up to £750 on a mortgage of £150,000 spread over five years. The reduced energy bills would mean a saving of up to £585 a year on a three-bed home. The eligible house builders are Barratt Homes, Berkeley Group, Countryside Properties, Crest Nicholson and Redrow Homes.
However, Barclays wants to expand to all major house builders by the end of the year. Barclays Mortgages head Hannah Bernard says: “We’re proud to be the first major UK mortgage lender to offer a product that helps home buyers in their decision to purchase a green new-build home.”
Energy and clean growth minister Claire Perry says: “As well as the prospect of an exciting new energy efficient home for consumers, the launch of Barclays green home mortgage, a major UK financial institution, is exactly the kind of progress I want to see more of as we consider the recommendations of the government-commissioned Green Finance Taskforce.”
Rhian-Mari Thomas, managing director and chairman of Barclays Green Banking Council, said: “This will be an increasingly important part of the mortgage market. Decarbonising UK housing stock is critical and forms a key part of the UK government’s clean growth strategy. Increasingly our clients want to say ‘we are getting on board with a low carbon future’.”
In November last year Barclays issued a €500m ‘green bond’, which will help fund these mortgages. Barclays has utilised EPC data in developing both the green bond and now its green mortgage.
Barclays will initially partner with Barratt Homes, Berkeley Group, Countryside Properties, Crest Nicholson and Redrow Homes, with a view to adding all major house builders by the end of the year.
Thomas said the government’s decarbonisation targets have motivated the bank to expand its green activities where commercially viable. While she is pleased Barclays has taken a leading role in developing the green mortgage, she encouraged other lenders to provide competition with their own green mortgages. Thomas added:
“We hope to be a trailblazer. Hopefully green mortgages are going to emerge as a big asset class – I’m sure there will be many flavours of green mortgage.”
The EPC data Barclays utilises for the mortgage is publicly available, meaning other institutions could utilise the same data in such a way.Thomas has represented Barclays on the government’s Green Finance Taskforce, which has the remit of accelerating the growth of green finance to meet the UK’s carbon reduction targets.
HSBC was also represented, which is another UK lender throwing its weight behind environmentally friendly schemes. The bank has pledged to provide $100bn in sustainable financing and investment by 2025 for “clean energy and lower-carbon technologies”.
The launch of the green mortgage coincides with energy efficiency regulation hitting the private rental sector this month.Properties being rented out are now required to have an EPC rating of E or better on new tenancies and renewals. Thomas hinted at Barclays launching more green financial products over the course of 2018. She said: “We’re looking at opportunities to innovate. This is what makes being a banker fun!”
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