There are now at least 15 lenders offering over 200 different mortgages described as ‘green’ or that offer a green incentive, according to Moneyfacts.

They range from large banks and building societies to smaller mutuals and specialist lenders.

But what exactly is a green mortgage?

Green deals

There is no industry-wide definition of a green mortgage but they are recognised as products that are either designed for those buying an energy efficient property or making home improvements to boost the energy efficiency of their home. There are also green buy-to-let mortgages for landlords looking to reduce the carbon emissions of their property.

Or they can be a standard mortgage that simply offers a green incentive, such as a discount for borrowers buying a property with an A or B rated Energy Performance Certificate for example.

Green mortgages come as fixed or variable rates, with a range of terms and fee options, just like any other mortgage. Lenders usually rely on Energy Performance Certificate ratings to measure the energy efficiency of the property.

Each lender has their own criteria as to what constitutes a green mortgage but one thing is clear. This is a growing sector in the mortgage market.

Are they any good?

It depends on the deal and your circumstances. A green incentive could mean you get a discount from a lender if you use the money to fund energy efficient home improvements. But you still need to compare that mortgage to all those available across the market and you could find cheaper elsewhere.

A mortgage broker can search the market for you and look for specific green deals alongside standard mortgages to see what best suits your needs.

This sector is growing so we could start to see more competitive green deals that also feature in the best buy tables. We can also expect to see lenders being more generous on what they will lend if the property has better energy efficiency, for two reasons.

Firstly, lenders know that a more energy efficient home means lower bills, giving borrowers more disposable income to put towards their mortgage repayments. Secondly, they are looking carefully at the properties they lend on in advance of potential future rules that could affect the value of homes with poor energy efficiency.

As the UK moves towards its 2050 net zero target it’s likely the government will encourage or require builders, homeowners and landlords to reduce the carbon emissions of their homes. Those that can’t or won’t could find it harder to find a new mortgage or even find that their property is less appealing to buyers.

For now, it’s worth looking out for green mortgages if you are buying a newly built home, as they are usually more energy efficient, or if you are planning to make home improvements that improve energy efficiency. In both instances you may be able to find a competitive green deal.