UK homeowners could see their mortgage rates reduced if they make their homes more energy efficient, under a new pilot scheme backed by the government.
The initiative forms part of 26 innovative green finance projects that aim to make energy efficiency more attainable for UK households.
Perenna Bank has been awarded more than £193,000 in government funding to develop a long-term, fixed-rate mortgage that incentivises homeowners to improve the energy efficiency of their properties. The scheme offers the benefit of reduced mortgage rates for customers who choose to implement these upgrades.
Lord Callanan, Minister for Energy Efficiency and Green Finance, spoke about the government’s commitment to enhancing energy efficiency across the UK, saying: “The Government has put in place long-term commitments to ensure homes across the country have greater energy efficiency to reduce bills, drive down energy use and lower emissions. We are supporting these organisations to develop fresh and innovative ways of helping more people get better access to energy efficiency measures, such as loft insulation, double glazing and heat pumps.”
An additional pilot project will allow buy-to-let landlords to add the cost of energy-efficient upgrades to their mortgage. This scheme will facilitate borrowing for property improvements and enable inclusion of these costs in monthly repayments. Ashman Bank Limited will receive £200,000 to design and develop this mortgage product, which includes an assessment of a property’s energy efficiency, suggestions for improvements, and the cost implications over the mortgage term.
The 26 projects under the Green Home Finance Accelerator initiative are supported by £4.1m of Government funding and are expected to save homeowners more than £460 annually on their energy bills, providing much-needed relief in the face of rising living costs.
Scott Brown, head of equity release pricing at Aviva, expressed his delight at the funding announcement: “Aviva is delighted to have secured funding from the government to explore building a green mortgage solution for later life lending. Aviva and the Department for Energy Security and Net Zero will co-fund our customer research to explore the development, which will aim to enable later life households to make home energy efficiency improvements, making their homes more comfortable to live in, reducing energy bills and helping drive a reduction in the carbon footprint of the UK’s housing stock.”
Craig Calder, head of secured lending at Virgin Money, another successful bidder, also welcomed the initiative: “To be part of the innovative Green Home Finance Accelerator project is important for Virgin Money as we look to reinforce our aspiration to halve our financed emissions by 2030 and deliver net zero by 2050.”
Following a six-month Discovery Phase period, all 26 projects will have the opportunity to apply for larger grants, ranging between £200,000 and £2m, to pilot their green finance products and services. These investments form part of the £20m Green Home Finance Accelerator, funded through the £1bn Net Zero Innovation Portfolio. This funding aims to ensure as many homes as possible reach an Energy Performance Certificate (EPC) band C by 2035, likely leading to lower fuel bills. For a standard occupancy and heating regime, homeowners who upgrade their homes to EPC C could potentially save over £460 annually on energy bills.
