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Green mortgages: could they increase the energy efficiency of UK homes?

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The UK Government’s Clean Growth Strategy, released in 2017, included plans to work with lenders to develop green mortgage and to incentivise people to make their homes more energy efficient.

What are ‘green mortgages’? At the moment, there is no universal definition of green mortgages, but they usually refer to mortgages on energy efficient homes. It might be useful to expand this definition to include climate resilience as well as energy efficiency. The reasoning behind promoting green mortgages is that owners of energy-efficient homes might be less likely to default on their payments. Since energy efficiency lowers energy use, energy-efficient homes should have lower bills. This might make the homeowners less likely to default on their mortgage payment because their disposable income will be larger.


Green mortgages are only part of the equation for encouraging energy efficiency: beyond the use of mortgage products, the UK Government should also look at other ways of encouraging energy efficiency, as household access to financing is not the only barrier to energy efficient homes: homeowners may also feel discouraged from investing in energy efficiency measures  by other factors: a lack of awareness; the level of hassle involved in making home improvements; the length of time for energy saving measures to ‘pay back’ the cost paid out in their installation; and by the mismatched incentives between tenants and landlords, where the person making the investment is not necessarily the one reaping the rewards.