The premise is straightforward. If you take out a mortgage on a home with high energy efficiency, a lender will reward you with a discounted interest rate.
Green mortgages represent some of the lowest available rates on the Irish market and, since their introduction in 2019, they have grown more prevalent among borrowers. The latest data from the Central Bank shows that in the first half of 2024 about 40 per cent of new mortgage originations were green.
As it stands, green mortgages are offered by the three pillar banks, Bank of Ireland, AIB (and its subsidiaries Haven and EBS) and PTSB. In some cases, the disparity between green and non-green rates can be significant.
How much can you save with a green mortgage?
Over the past couple of years, AIB has been criticised for the gap between some of the green and non-green interest rates it offers. The loan-to-value (LTV) ratio of the property is, of course, relevant to the rates, as lenders generally offer better rates to borrowers with lower LTV ratios.
“If we look at the broker channel called Haven, their four-year green mortgage is 3.45 per cent,” says Eoin O’Connor, associate director at Finance Solutions in Dublin. “To remind you, to qualify for that, the home must be B3 or higher. If you buy a C-, D- or E-rated home, and you want the next best fixed rate, it’s 4.55 per cent. That’s a huge difference.
“If I look at a mortgage for €300,000 over 30 years, that’s €190.21 per month of a difference. They’re getting a lot of flak for this because it’s such a huge difference. They’re nearly punishing people for not buying new or buying a recently renovated home. I do expect AIB to move on offering lower rates for people who can’t afford or just don’t want to buy a newbuild or a recently renovated home.”
AIB’s lowest green mortgage product has an interest rate of just 3 per cent but requires a home with a Ber between A1 and A3, and an LTV rate of less than 50 per cent.
A B3 rating is usually the minimum requirement for a green mortgage, although Bank of Ireland’s EcoSaver Mortgage model operates on a sliding scale. It gives a larger discount to highly efficient, A1-rated homes but still rewards customers in some capacity with discounts all the way down to F and G-rated homes.
“Bank of Ireland have actually got rid of the green mortgages per se,” says O’Connor. “They remodelled their interest rates and what they did is they said, regardless of your energy rates, we’re going to give you a discount. If you have a mortgage over €250,000, as opposed to saying we’re just going to reward you for buying an A-rated home, their rates range from 3.1 to 3.4 per cent.
“You get a bigger discount if you have a higher energy rate. Their lowest rate is the A-rated, four-year fixed rate once you’re buying one over €250,000. That’s 3.1 per cent. Even if you buy a D-rated home, which the majority of second-hand homes, especially in Dublin, are – they will give you 3.25 per cent.”
In some cases, the difference between green and non-green rates is not as notable. PTSB recently cut its headline product to a market-leading 3 per cent for a non-green, four-year fixed rate with an LTV rate of less than 60 per cent. Gerry Hiney, managing director at Park Financial mortgage brokerage, believes PTSB’s green rate still offers a better mortgage overall.
If a customer opens a current account as well as taking out a three-year fixed green mortgage of €350,000 with an LTV of less than 60 per cent, they will receive 2 per cent off their monthly repayments and a €7,000 lump sum in cashback. Though he sees it as a better deal, Hiney thinks the awareness around green mortgages can sometimes be greater than their money-saving impact.
“The discounts on [PTSB’s] suite of rates for a green mortgage or an A or a B-rated property can be anywhere between 0.1 and 0.25 per cent of a differential,” he says. “When people talk about them originally, I just get the impression that they think the discount is going to be more.
“Mortgage sizes are increasing all the time and a quarter per cent off an interest rate is certainly significant in this day and age. It’s very welcome. You get a lot of people with existing properties on fixed rates coming out [of their term] in six months’ time but they’ve done works to their property and they’re going to get an updated Ber cert on the property. Then when they go to fix with their existing lender or switch to another lender, they’ll be able to avail of the green mortgage.”
Irish homeowners growing more Ber conscious
More than 150,000 Ber certs were awarded to new and existing houses in Ireland in 2024, up 7 per cent on the previous year.
Customers are growing more conscious of energy efficiency. Green mortgages are one aspect of that development but so too are the schemes and grants around new and energy efficient homes.
“All new builds have to be built to A-rated standards,” says Veronica Daly of Moneytree Finance in Cork. “If you’re a first-time buyer, you’re going to try to get as much help as you can either through the First Home scheme or the Help to Buy scheme, and they are all focused on new builds. That would feed into the fact that there would be more green mortgages.
“Also, I suppose, the push from the Green Party – there’s a lot more help out there on getting your house energy rated. As people do up their houses, they’re now falling into that green-rated slot. So, if they’re switching their mortgage at all then they would switch to a green rate.”
Some of the green incentives for development include the Croí Cónaithe grant, which can award up to €50,000 for renovations on a pre-2007 property that has been vacant for at least two years. That can be topped up by a further €20,000 if the property is structurally dangerous or derelict.
Green mortgages are inherently available for newly built houses in Ireland given they must comply with EU regulations that already meet the Ber threshold. The green rates themselves may be more of a motivation for someone looking to retrofit an existing property that does not currently hold a B3 rating.
“It does make people more aware to get their house energy rated,” says Daly. “When they’re looking at the market, they look at what needs to be done and, when you’re looking at your Ber report, you see what you need to do to get up to that better energy rating. I suppose it makes people more conscious that there’s better rates out there the higher your Ber. So, I think, from that point, it’s a good thing.”
Do green mortgages have a green impact?
It is in the interest of lenders to offer green mortgages. Climate risk is one financial incentive. An energy crisis could damage the sector if borrowers facing higher energy prices struggled to repay their mortgages. Climate risk is important for institutional investors, too, who often implement a climate-related investment strategy.
Paul Lyons, an economist at the Central Bank, has conducted research on the rise of green mortgage products. He sees their impact as an overall positive for the Irish market, both for individuals and lenders.
“Green mortgage products can offer benefits for both borrowers and banks by incentivising energy-efficient investments. Offering lower interest rates on energy-efficient properties encourages borrowers to adopt energy-saving technologies, resulting in cheaper household bills.
“Differentiating products based on energy efficiency demonstrates the banking sector’s commitment to embedding climate related risks into its core business. Over time, having more energy efficient homes will lower energy-related credit risk in the banking sector. At the same time, homeowners will benefit from living in more energy efficient homes where they can reap both the financial savings and health benefits.”
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