The number of green mortgage products has rocketed in the past year, but is their popularity a long-term thing?

The rise in green offers is marked in the buy-to-let market, which had 353 products on the market in March, compared to just four a year ago, according to broker Mortgages for Business.

The firm’s managing director, Gavin Richardson, says: “Choice totally eclipsed what was on offer this time last spring. While there are more green products for individual owners – there are now 312 on the market – the most marked increase was in limited company lending, where the number of products has risen by more than fivefold since August last year.”

Lenders and the government need to do more to help people make wholesale changes rather than tinker at the edges

The move comes at a time when the country faces a cost-of-living crisis. Energy bills are set to rise by an average of 54% in April, inflation has jumped to 6.2%, interest rates have lifted three times in four months to 0.75%, with national insurance contributions and council tax bills also set to rise – sparked by supply chains shortages and the war in Ukraine.

This follows government proposals in 2020, which said that all new tenancies from April 2025 in the private rented sector must have an energy performance certificate from A to C, while existing tenancies must meet this standard by April 2028.

Xpress Mortgages founder and director Rachel Lummis says that it is against this backdrop that landlords are taking a hard look at green property loans.

The tough nut to crack is the country’s older housing stock

She says: “We were not having conversations with landlords about this six months ago. Now they are all thinking about it, and rising costs set to come through this year have sharpened minds.

“A lot of landlords are looking at five-year fixes at the moment. If you have the right EPC standards you can get a loan that is up to 0.5% cheaper, which is a saving of thousands over the period. These types of mortgages will rise in popularity.”

However, others in the industry say residential homebuyers and landlords on tighter budgets will not have the cash to make the improvements needed to obtain a high enough EPC rating to allow them to switch to a green loan.

Most consumers do not know what an EPC is. And will not know unless they get advice from a broker

The average EPC rating in England and Wales is D, whereas most lenders offer green home loans on properties rated at C or above.

Your Mortgage Decisions director Dominik Lipnicki says: “The squeeze on living costs means that many people on lower and middle incomes simply will not be able to find an extra £10,000 to put solar panels on their roofs.

“They know these changes make sense, but right now a number of people face the choice of heating or eating this year. These changes demand significant outlays of cash upfront, which pays off in the medium and long term.

If you have the right EPC standards you can get a loan that is up to 0.5% cheaper

“Lenders are offering more of these loans. But lenders and the government need to do more to help people make wholesale changes rather than tinker at the edges.

“More also needs to be done to publicise what is already out there. Most consumers do not know what an EPC is. And will not know unless they get advice from a broker.”

The industry’s rising green loans deals comes against the government’s target to slash emissions by 78% by 2035 compared to 1990 levels, and hit net zero by 2050.

Homes will play a big part in this, as the UK’s housing stock accounts for around 14% of all emissions.

Rising costs set to come through this year have sharpened minds

L&C Mortgages associate director, communications David Hollingworth says: “A lot of people are looking at all the elements of the cost of living crisis and are asking ‘is this the moment when it all comes together and green mortgages take off?’

“The tough nut to crack is the country’s older housing stock. Money spent on things like insulation, double-glazing and heat pumps amounts to thousands. Will rising gas and electricity bills this year prompt people to make these changes?”

The industry will have to wait to see if higher energy bills force people to insulate their lofts, or  if they just opt to wear a jumper around the house.