US mortgage promotes green homes

A mortgage has been launched in the US that rewards home owners for energy-efficient home improvements.

While the inclusion of an energy efficiency report in the UK’s Home Information Packs is designed to raise home owners’ awareness of the environmental impact of their properties, the American product takes this one step further by encouraging environmentally-friendly homes.

With the energy-efficient mortgage, funded by Fannie Mae, the home is inspected and scored by a certified energy rater, much like the UK’s Home Condition Reports.

The costs of green improvements such as more insulation or double-glazing that improve the score are rolled into the loan.

Although mortgage repayments are higher, lower monthly bills mean the home owner qualifies for a larger mortgage. After a year, the government will hand out tax credits for further home energy improvements.

Gary Lacey, group product manager at Norwich & Peterbourgh, which offers a green mortgage product to encourage home buyers to purchase more energy-efficient properties, welcomes the US scheme.

He says: “The average home releases about six tonnes of carbon dioxide every year. Energy-efficient homes are not only good for the environment but cheaper to run too. By using less energy, everyone can make a contribution to protecting the planet.”

However, other lenders remain unconvinced that such products will take off in the UK.

Linda Will, managing director of Accord Mortgages, tells Mortgage Strategy: “This product sounds like a good marketing ploy, but it’s unlikely people will select a mortgage or change their lifestyle based on such small incentives. Home Condition Reports will probably be more significant in raising awareness of domestic energy efficiency.”