Green mortgages in Ireland

As banks and financial institutions become more focused on their environmental impact, green mortgages are gaining popularity in Ireland. On this page, we’ll explore what green mortgages are, which types of properties qualify, how their interest rates compare to standard mortgages, and whether they offer good value for you.

Green mortgages usually come with lower interest rates compared to regular mortgages. To qualify, the home you’re purchasing or upgrading usually needs to meet certain energy-efficiency standards.

To be eligible for a green mortgage in Ireland, your home typically needs to have a Building Energy Rating (BER) of at least B3 or higher, but some banks offer them on properties with lower ratings. 

These reduced rates are generally available to first-time buyers, movers, switchers, and those building or upgrading their homes to meet the BER requirement. This means that you don’t necessarily have to buy a new-build home; older second-hand homes can qualify, as long as they have a good energy rating.

A Building Energy Rating (BER) measures how energy-efficient your home is, on a scale from A to G, with A1 being the highest rating and G the lowest. A-rated homes provide maximum comfort and minimal costs for heating and electricity, while G-rated homes are the least efficient and most costly to maintain.

By law, all homes sold or rented in Ireland must have a BER. This rating is determined by evaluating how much energy is needed for things like heating, hot water, ventilation, and lighting in your home.

To qualify for a green mortgage in Ireland, there is a set of criteria you and your property need to meet. These will vary depending on the lender.

Here are the main criteria:

• Energy rating: The property should have an energy rating of B3 or better, up to the top rating of A1. You’ll need the BER certificate to prove its energy efficiency.

• Property type: Green mortgage loans are available for:

  • Purchasing an existing property

  • Building a new home

  • Renovating a home to achieve energy efficiency

• New builds and renovations: For new-build homes and renovations, you may need to show a building certificate that confirms the building complies with Nearly Zero Energy Building (nZEB) standards.

• General mortgage requirements: As with any mortgage, you must be living in Ireland and be over 18 years old.

Most lenders offer the best green mortgage rates for homes rated B3 or above. However, the Bank of Ireland has recently introduced a tiered option where homes rated as low as G can qualify, albeit at a very small discount.

The discount you get on a green mortgage varies widely depending on the mortgage lender. Recently, due to expectations of falling interest rates from the European Central Bank (ECB), major lenders have reduced their rates for green mortgages in Ireland.

Taking the current green mortgage rates offered by the Bank of Ireland as an example, homes with an A energy rating can receive a discount of 0.35 percentage points on the standard fixed mortgage rate. Homes with a B rating get a smaller discount of 0.30 points, while homes with a G rating receive only a 0.05 point discount.

Another major provider, AIB, offers even bigger discounts on its green offering. First-time buyers can benefit from a 5-year fixed rate of 3.55% on its green mortgage loan, much lower than the non-green 5-year fixed rate of 4.80%. This can result in substantial savings over the total term of the mortgage.

Remember that rates can change at any time, and these are the current rates as of July 2024.

Pros:

• Lower interest rates: You can save money on your mortgage repayments.

• Energy savings: An energy-efficient home costs less to heat and power, saving you money on your energy bills.

• Benefits for reselling: A highly energy-efficient home may be attractive to future buyers.

• Environmental impact: Energy-efficient homes can contribute to a lower carbon footprint.

Cons:

• Rate comparison: Depending on the provider, green mortgage rates in Ireland may not always be the lowest available.

• Limited options: Currently, green mortgages in Ireland are mostly fixed-rate, sometimes with fees for switching or ending the term early, and there are fewer lenders to choose from.

• No cashback: Unlike some other mortgages, green mortgages don’t tend to offer cashback.

• Shorter terms: Green mortgage loans are typically available for up to five years only.

• Renovation costs: Upgrading an old house to meet energy-efficient standards can be expensive. 

If you meet the green mortgage requirements, i.e. you own or plan to buy a home with a building energy rating of B3 or higher, it may be worth exploring green mortgages in Ireland. Right now (July 2024), you can find some of the best fixed-rate deals on green mortgages.

What’s more, new options like the Bank of Ireland’s tiered green mortgage can give you an incentive to improve your home’s energy rating. The higher your rating, the greater your savings. This means you don’t need an already energy-efficient home to benefit; making improvements can help you take advantage of these lower rates.

Before applying for a green mortgage in Ireland, it can help to research and consult with mortgage experts to find the best green mortgage for your needs.

Green mortgages themselves don’t necessarily make lenders more eco-friendly or ethical. However, they do promote environmental benefits by encouraging people to buy or upgrade to energy-efficient homes.

It’s worth noting that these mortgages don’t usually come with extra environmental programmes, such as carbon offsetting. Instead, their main benefit comes from having more people living in homes that consume less energy and produce a smaller carbon footprint.

Plus, since new homes built since 2019 in Ireland must meet at least an A2 energy rating, green mortgage loans primarily encourage buyers to opt for these already energy-efficient properties.

If you’re looking for a savings account that will help you save for a mortgage, you can quickly and easily open savings accounts from a range of banks by registering for a Raisin Account. It’s completely free. Plus, Raisin Bank currently offers competitive rates on fixed term deposits, so you can get more from your money.

As of July 2024, several lenders in Ireland offer green mortgages, and their rates are as follows:

• Haven: 3.45% for a four-year fixed rate green mortgage.

• AIB: 3.55% for a five-year fixed rate.

• PTSB: 4.15% for a five-year fixed rate green mortgage.

• Bank of Ireland: 4.30% for one- and two-year fixed rate Ecosaver mortgages for homes with a BER of A.

Note that these rates can change and are influenced by interest rates set by the European Central Bank.

Yes, you can switch to a green mortgage loan from an existing mortgage, but the options and costs depend on your current mortgage type and lender.

• Fixed-rate mortgage: If you’re on a fixed-rate mortgage, you can switch to a green mortgage, but you might face a breakage fee if you switch before your current term ends.

• Variable-rate mortgage: Switching from a variable-rate mortgage to a green mortgage is usually more straightforward.

You can also switch to a green mortgage with a different lender, provided your property has a BER rating of B3 or higher. Some lenders require that you have at least five years remaining on your mortgage to be able to switch.

Before switching, you might consider if it will be beneficial for you. If you’re already on a favourable fixed-rate mortgage with a lower rate than the new green mortgage, switching might not be cost-effective. It can be helpful to compare options on different lenders’ websites.

To check if your home has a valid BER certificate, you can use the online BER register provided by the government authority SEAI.

If you can’t find a BER rating online, you’ll need to hire a qualified BER assessor. The assessor will come to your home and use specialist software to inspect each room. They’ll look at various aspects, including the insulation levels in your walls, roof, and floors, the energy performance of your home’s heating source, and your home’s ventilation and lighting.

Yes, you can improve your BER rating to take advantage of green mortgage rates. To do this, you might consider investing in upgrades that reduce heat loss. Installing heat pumps or solar panels can also boost your rating.

You might prefer to go the official route and bring in a qualified BER assessor to evaluate your home and recommend improvements such as better insulation, a more efficient heating system, and upgraded windows. You can find a list of registered BER assessors on the SEAI website.