GREEN AND ECOLOGICAL MORTGAGES in the United Kingdom

A Guide to Green and Ecological mortgages

Green mortgages, which are also known as ethical or sustainable mortgages, are considered to be better for the environment. Although currently only offered by a few of the major mortgage lenders, green mortgage loans and ecological mortgage loans are becoming more popular.

The condition, and projected future of the environment is currently high on political agendas and in public consciousness, but in reality, how much good can a green mortgages really do?

A Green or Ecological mortgage, aims to reduce the negative impact on our environment. The lenders that offer these packages will often make contributions to charities that support the environment or assist in the welfare of the less fortunate. Some will only finance houses that are seen to be built on an environmentally sound basis.

In addition to these factors, most of these lenders will not work with businesses that are known to pollute or damage the environment in any way, or contribute to 'negative' industries.

At the moment there are few lenders that offer the 'green or ecological mortgage' package:

• The Co-operative Bank
• The Norwich & Peterborough Building Society
• The Ecology Building Society
• The Hanley Economic Building Society
• Teachers Building Society

One of the things that all these lenders have in common is that they all support reforestation schemes, so when and if you take out mortgages with them, you can understand that you are participating in helping the environment.

What is a 'green or ecological mortgage'?

A green or ecological mortgage is a home loan that is taken out in the standard way, but that is beneficial to the environment. This can be different in several different ways, and to many different extents. Some lenders provide green mortgages by engaging in planting schemes, planting a certain number of trees per loan, thereby offsetting its carbon footprint, whilst other green or ecological mortgages will only be lent on those houses that have are being built in an ethical/sustainable direction, or have an ecological basis for the loan. Furthermore, some green lenders will donate a percentage or fixed amount towards the environment or a charity on behalf of the borrower.

How does a 'green or ecological mortgage' benefit the environment?

The ways in which green or ecological mortgages benefit the environment depends upon the nature of the lender and the loan product, so, they vary company by company. Some green lenders will lend mortgage capital on ethical properties; for example those built using sustainable or reclaimed materials, and those that are built or converted to be energy efficient, or those that offer an ecological payback, in terms of carbon offsetting. Other green lenders make their mortgages green by donating to the environment on the behalf of the borrower, or planting trees on behalf of the borrower, as mentioned above.

Are there 'many green and ecological mortgage' lenders and how do their green loans/mortgages differ?

The number of mortgage lenders who currently offer green mortgages remains surprisingly low. There are three principal green lenders: the Co-operative Bank, the Norwich & Peterborough Building Society, and the specialist ecological mortgage lender Ecology.

The Co-op are noted for making a direct donation to Climate Care (a charity investing in offsetting carbon emissions), although this has been cynically reviewed by some experts who claim it is too expensive, and one should be aware of the 'green-wash'. Norwich and Peterborough, another lender with a green aspect, aims to offset the carbon emissions of its borrowers through planting trees, in close association with the Carbon Neutral Company.

Could I borrow on a 'green or ecological mortgage' to start a farm or smallholding, or build towards developing renewable energy?

Ecology Building Society, considered one of the greenest of the mortgage lenders, will only lend on properties providing environmental benefit, including organic smallholdings and farms. Ecology fills a niche in the market, and in addition, borrowers can even reduce their headline rate by borrowing money to install energy efficiency measures such as renewable energy systems.

Could I save money by being green with my mortgage and house?

Although the answer is yes in many cases, it is up to the individual to decide whether or not their environmental actions are best taken on their mortgage loan. This is another incremental way of reducing the potential damage overall to the environment.

Is the 'green and ecological mortgage' loans market likely to grow?

With environmental concerns at the forefront of political agendas and public consciousness, it is only a matter of time before other companies start to offer ethical, sustainable and green mortgages, so it is certain that many more players, both large and small will be entering the market.

Can I save money on my loan, or am I paying to be green?

This depends on the broker you choose, and this is where MONEY CAN BE GREEN can help with your individual circumstances, and the type of loan you are interested in. For instance, if you are thinking of a renewable building project involving entirely sustainable materials, it may be that a green loan from a building society like Ecology is your cheapest and best option, but we will advise you on the various options. Most green or ecological mortgage loans on the market appear to be competitive, although we will shop around for you, find the cheapest headline rate, and then find you the most suitable mortgage.

Could I save money by making my house more green and energy efficient?

Absolutely, energy efficiency is the key to cutting down bills. At its most simple, you can lose heat from hundreds of different areas around the house. Whether your energy efficiency measures are as simple as insulating your loft, you could save money almost straight away. Please see the ENERGY CAN BE GREEN guide to energy efficiency.

Additional green benefits

Often you will be able to take out a green mortgage package, where your household emissions and energy usage can be monitored, and therefore you can benefit from the knowledge that you are causing less damage to the environment, and you can also save money on your electricity and gas bills! For further information, please see the ENERGY CAN BE GREEN guide to energy efficiency.