Barclays has just shaken up the mortgage market with a new five-year fixed deal at a rate of 3.96% – the lowest currently available. But before borrowers get too excited, there’s a catch: the deal is only available to homeowners with a property that meets strict energy efficiency criteria.

So, why are banks suddenly prioritising green homes, and what does this mean for buyers, homeowners, and landlords? Let’s break it down.

What’s the Deal?

Barclays’ new mortgage rate is a standout offer, coming in significantly below most other five-year fixed deals on the market. But to qualify, you’ll need:

• An Energy Performance Certificate (EPC) rating of 81+ or B
• A minimum 40% deposit
• To pay an £899 arrangement fee

This offer is part of Barclays’ Green Home Mortgage range, which aims to reward buyers and owners of energy-efficient homes. Sian McIntyre, managing director of mortgages and savings at Barclays, explained that with household costs rising, the bank wants to make homeownership more affordable – particularly for those who have made efforts to improve their home’s efficiency.

This move follows a growing trend in the mortgage industry, where banks are looking beyond traditional financial factors and incorporating environmental criteria into lending decisions.

Why Are Lenders Focusing on Energy Efficiency?

The push for greener homes isn’t just about cutting carbon emissions – it’s also about financial risk.

Homes with lower EPC ratings typically cost more to heat, making them more expensive to run. That means borrowers in less efficient homes might struggle more with bills, increasing the risk of missed mortgage payments. By offering better rates to those in energy-efficient homes, lenders are effectively reducing their own exposure to potential financial difficulties.

But there’s another reason: landlord regulations.

The Government has set a deadline of 2030 for rental properties to meet a minimum EPC rating of ‘C’. If landlords fail to upgrade their properties, they could struggle to remortgage or even face restrictions on letting their homes. Lenders are already preparing for these changes by offering deals that favour homes with better energy ratings.

How Do You Check Your EPC Rating?

If you’re unsure of your property’s EPC rating, you can check the Government’s EPC register online. Keep in mind:

• If you haven’t bought or sold your home in the past decade, your EPC may be out of date.
• A new assessment can be arranged if your home has undergone improvements.

For homeowners or landlords with a low EPC rating, now might be the time to start thinking about upgrades – especially if you want access to lower mortgage rates in the future.

How Can You Improve Your EPC Rating?

If your property falls short of the required rating, you may need to make some changes. Simple fixes include:

• Installing loft and wall insulation to reduce heat loss
• Replacing old bulbs with energy-efficient LED lights
• Upgrading windows and doors to prevent drafts

More significant improvements could involve:

• Switching to a heat pump or high-efficiency boiler
• Adding solar panels to generate renewable energy
• Installing smart home technology to improve energy management

However, some of these upgrades can be costly. Homeowners and landlords should weigh up the financial benefits – such as access to lower mortgage rates and reduced energy bills – against the upfront investment required.

Is It Worth Going Green for a Cheaper Mortgage?

If your home already meets Barclays’ criteria, this mortgage deal is a great opportunity to lock in a low five-year fixed rate. But if your home falls short, it raises a tough question: is it worth spending thousands on energy improvements just to access a better mortgage rate?

For landlords, the 2030 regulations mean that upgrading at some point will likely be necessary. Acting sooner rather than later could mean access to better financing options before stricter rules come into force.

For homeowners, the decision is more personal. While energy-efficient upgrades can add value to a property and lower energy bills, they need to be carefully balanced against the costs.

Either way, as more banks move towards energy-linked mortgage rates, it’s clear that home efficiency is becoming an increasingly important factor in borrowing. Whether buying, selling, or remortgaging, checking your EPC rating – and considering potential upgrades – might be one of the smartest financial decisions you make.