Alison Fearon from Switcheroo.ie mortgages discusses latest trends in the mortgage market
In times like these, when people are facing inflation and the high cost of living, it makes sense to cut back on household bills. One of the biggest expenses for homeowners in Ireland is mortgage repayments, which is why switching to a green mortgage can be a smart decision. But what exactly is a green mortgage, and why should you consider switching to one?
A green mortgage is a type of mortgage designed for buildings that meet certain environmental standards. This type of mortgage offers a lower interest rate to borrowers. Green mortgages were first established in Europe to finance renovations for green buildings, and then expanded to support sustainable development. They are now available to homeowners and first-time buyers in the form of green mortgage products.
To qualify for a green mortgage, you need to be borrowing for either a new build or second-hand property that meets the minimum Building Energy Rating (BER) requirement of B3 or higher. The BER rates the energy efficiency of a building between A and G, with A-rated buildings being the most efficient. Borrowers must produce a BER certificate that is no more than 10 years old and meet other lender requirements as part of their application.
Green mortgage products are increasingly common in Ireland and are available to buyers, movers and switchers through Bank of Ireland, AIB, EBS and Haven. These mortgages offer clear financial benefits to borrowers, but you may wonder what the banks gain from this arrangement. Green mortgages are good for public relations and great for the environment. They put the topic of sustainability in the mind of homeowners and align with climate change commitments in the Paris Agreement. In addition, the "loan to value" ratio is much more favourable for energy-efficient buildings. Studies show that there is less risk involved for banks when it comes to borrowing against a green mortgage.
Despite the financial incentives, some borrowers are not yet convinced. Going green requires up-front investment, and the sales pitch for green mortgage products is somewhat lacking. However, there is no apparent downside to the arrangement, and it makes sense for both parties. The uptake on green mortgage products is still rather slow, but borrowers will eventually realise the financial benefit of a green mortgage and the long-term savings that come with it.
If you can afford to renovate a green building or purchase a home with a high Building Energy Rating, you should consider switching to a green mortgage. The savings may not seem like much at first, but they add up over time and can make a significant difference over the term of a mortgage. For example, for mortgages over €250k, Bank of Ireland currently offers a fixed rate of 3.70% over a 4-year term, while the green mortgage rate for the same amount is just 3.40%, which will save you hundreds of euro every year. You can compare offers here on Switcheroo, which features all of the green mortgage products currently available in Ireland.
If you are considering this or any other mortgage product, be sure to get professional advice and register here with Switcheroo.ie.
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