Just launched: Britain’s first carbon neutral mortgage for green home buyers

Danske Bank is now offering a first-of-its-kind carbon neutral mortgage that offsets carbon emissions. Here’s how it works.

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If you’re a home buyer looking to boost your green credentials, Danske Bank is now offering customers in England a carbon neutral mortgage. Here’s how it works and how it can help you – and possibly the planet.

[top_pitch]

What is a carbon neutral mortgage?

Danske Bank’s carbon neutral mortgage involves the lender offsetting the carbon emissions generated throughout the mortgage lifecycle so there is no environmental impact.

As it stands, Danske Bank’s offer is the only carbon neutral mortgage in the UK. It’s also been certified as such by the Carbon Trust.

To be truly emission free, Danske Bank had to work out the carbon footprint for every mortgage it offers. The Carbon Trust calculated this to be 96kg of carbon (the same as the amount produced by driving 241 miles). The figure covers the complete mortgage process from beginning to end, including sending all the paperwork and digital storage. Danske Bank offsets the 96kg by investing in various wind energy projects in India.

Danske Bank already offers its carbon neutral mortgage to customers in Northern Ireland. It’s proving so popular that around 25% of their new mortgages are now carbon neutral.

Who can apply for Danske Bank’s carbon neutral mortgage?

The mortgage is only initially available to home buyers in the South East, South West and East of England through brokers registered with the Mortgage Advice Bureau.

To qualify, the house requiring a mortgage must also have an EPC (energy performance certificate) rating or PEA (predicted energy assessment) rating of A to C.

You can choose from loan values of 60% LTV up to 91%-95% LTV at a two-year or five-year fixed rate. Purchase rates are £999 and standard valuations are free.

[middle_pitch]

Can a green mortgage really help you save money and the planet?

The point of a green mortgage is to reward home buyers for making environmentally friendly choices, such as choosing homes with a good EPC rating. To incentivise you, green mortgages typically offer more competitive terms. This includes lower interest rates, cashback deals or discounted arrangement fees.   

Green mortgages aren’t new. Several lenders offer them, including Barclays and NatWest. However, Danske Bank is the first lender to offer a carbon neutral mortgage and proactively cancel carbon emissions.

Whether or not a green mortgage can save you money will depend on your own circumstances. For instance, your income and credit score will impact the interest rate you’re offered.

As with any financial product, the best way to make sure you’re getting the most favourable terms for your needs is to compare mortgages from different lenders. To get a rough idea of what you might be able to borrow, take a look at our mortgage calculator.

It’s also worth pointing out that 1.7 million homes in the UK simply can’t be improved to reach an EPC rating of C, according to research by estate agent Rightmove. Not only that, two-thirds of homes in England have an EPC rating of D or below, meaning they won’t currently qualify for a green mortgage.

Even if homes with a rating of D could be improved, the cost of doing so would likely be prohibitive. Ultimately, that means green mortgages aren’t an option available to everyone.

Let’s also remember that while the principles behind these products are positive, it’s going to take a bit more than an eco-conscious mortgage to save the planet.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

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