How green is your mortgage? The incentives to buy an A or B rated home are rising, but many cannot get hold of new-builds and are left paying more expensive ratesWith changes in the mortgage market, borrowers now have a clear incentive to buy newer, energy efficient homes. Photograph: iStockof the property involved is just the latest evidence of the home loan markets’ move to go green.
Mortgage broker Michael Dowling says he has concerns that the second-hand buyer is “paying the price” and often has no other option at a time when there are not enough new-builds on the market. Also, many buyers of older homes will not have the resources to increase the rating on their home in the short term and thus qualify for a cheaper loan.
To date, most of the products on the market have just been a straight choice between a lower interest rate for an A/B rating or a higher rate for a less favourable rating. However, Bank of Ireland has taken this a step further, offering a matrix of rates based on the six different BERs of A to G. This differs fundamentally from what is on offer elsewhere for two reasons. One is the discount – albeit smaller – for lower BERs, which would give some savings to purchasers of many second-hand properties. The other is that Bank of Ireland no longer charges less for lower loan-to-value loans, which has been a central factor in the market for many years.
In the context of interest-rate trends, the green rates – which AIB has just cut – look quite attractive, while the non-green rates look expensive, as interest rates are expected to fall generally in the months ahead. However the AIB rates for “non-green” borrowers are in line with much of the rest of the market. At, the ordinary five-year fixed rate is 4.95 per cent, while its comparable green rate is 4.25 per cent.
There are a few key points to look out for – and they go beyond the pure interest rate on offer. One, with fixed rate products, is whether additional repayments are allowed if, for example, you get a bonus or come into an inheritance – and here rules differ across the market. A second is whether there are cashback incentives – these should not blind the borrower to more expensive interest rates, but of course cash is always nice.