As we have more disposable income, many are increasingly concerned about how their money is spent, and where their investments go.

A trend that can clearly be seen with the rising popularity of organic and free-range foods; no longer do we just buy something without questioning how it got to us. Now we are willing to pay a premium to make sure it got there in an ethically- and environmentally-friendly way.

First your food, now your mortgage

Bank accounts were the first to feel the wrath of concerned citizens who were wondering what exactly their high-street bank actually did with their savings, and where they were being invested.

The Co-operative Bank was one of the first to see an oportunity and introduced accounts where they promised not to invest the money into regimes with bad human rights records, or into companies who were involved in such trades as fossil fuels.

From there it was a simple step to make their mortgage products also equally kind to the environment.

Green mortgage types

There are generally two different types of green mortgage offered by UK lenders:

1. Donation: The lender makes a donation to an eco-cause on your behalf during the term of your mortgage. Mostly this involves planting a lot of trees.
2. Subsidy: The more energy-efficient your property is, the more the lender will lower your mortgage interest rate.

Only one of these types has any value. Green mortgages are generally more expensive than traditional, so if you care about carbon offsetting it would be better to pay a charity directly to plant trees on your behalf.

The subsidy type is the best type of green mortgage to go for. It gives a huge incentive to make home improvements which will lower your overall energy consumption. A lot of green mortgage lenders will also lend extra money if you guarantee it will be used for energy-reduction projects in your property.

Green mortgage lenders

The green mortgage market is currently dominated by the faster moving smaller mortgage lenders right now, such as Norwich and Peterborough, Co-operative Bank and the Ecology Building Society. Throughout the next 12-24 months though, many of the bigger players will want to play their hand and join the market too. Most of them have already agreed in principle to the idea, with only the Nationwide and Bradford & Bingley currently stubbornly holding out.

Remortgage the green way

Right now, most of the green mortgages are only available on new properties - as new purchases now come with an Energy Performance Certificate which is an official document disclosing exactly how energy-efficient a property already is.

Also see our Question & Answer about getting a green bad credit remortgage.