Green drive risks ‘eco privilege’

‘It risks a gulf between those who can afford energy improvements and those who can’t’

Mortgage lenders’ push to offer lower rates to more environmentally friendly properties risks “eco privilege” among homebuyers, experts have warned.

Lenders incentivise borrowers to make eco improvements with lower rates and cashback deals, while others offer an advance to fund works.

But this approach could mean homeowners who cannot afford costly changes instead pay higher mortgage costs. Not all borrowers will be able to take on more debt to increase their home’s energy efficiency.

Habito, a mortgage broker, has warned this reward system could lead to “eco privilege”.

The Government has forced banks to make affordable lending available for green improvements. By 2030 lenders will be required to have an average EPC band C ranking across their portfolios. As a result, banks are increasingly widening the availability of these green deals.

This week Nationwide reduced the deposit required for a “green advance”, meaning existing borrowers now only need a 10pc deposit for a loan of up to £25,000.

The cheapest of Nationwide’s advance loans, those taken out on top of existing mortgages, costs 1.69pc. But its green advance loan is priced at 0.94pc, with the caveat half must be spent on energy efficient improvements.

Coventry Building Society also extended its green cashback scheme, which gives borrowers £ 500 for eco upgrades to their home, until March 2022.

Sarah Coles, of fund shop Hargreaves Lansdown, warned the policy favoured more affluent owners.

She said: “This approach was always going to open up a gulf between those who can afford to make changes to improve energy efficiency and those who can’t. Either because they’re closer to their maximum affordable borrowing or it would simply cost too much to make their home more efficient.

“There’s a real concern that over time, those with less energy efficient properties will find it harder to get an affordable mortgage.”