Homeowners who make their properties more energy efficient could see their mortgage rate cut under a new government-backed pilot.
More than £4m has been awarded to green finance projects to support those who want to make environmentally friendly changes to their property.
Perenna Bank will receive more than £193,000 in government funding to help develop their long-term, fixed-rate mortgage to incentivise customers to make their homes more energy efficient by offering to reduce their mortgage rate.
Another trial will see buy-to-let landlords add the cost of making properties more energy efficient on to their mortgage – enabling them to borrow the money for the improvements and include it in their monthly repayments.
Ashman Bank Limited will be awarded £200,000 to design and develop this, which will assess a property’s energy efficiency, provide options on how it can be improved and incorporate the cost of carrying out the work on to the duration of the mortgage.
Lord Callanan, Minister for Energy Efficiency and Green Finance, said: “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.”
New mortgage product
The projects are among 26 green finance products being developed and tested, backed by £4.1 million of government funding.
They are aimed at encouraging and helping homeowners make their properties more energy efficient, with measures such as loft insulation and double glazing. This in turn will help them save more than £460 a year on their energy bills – one of many ways the Government is helping ease the cost of living for families across the country.
Other projects successful in bidding for funding include Aviva Equity Release UK Limited, who will receive £87,612 to design a service that allows homeowners to access equity in their property through a specialist lifetime mortgage, freeing up cash to improve the energy efficiency of their homes.
Clydesdale Bank PLC, trading as Virgin Money, will receive £171,000 for a product that will offer bespoke energy efficiency products for customers’ properties, after carrying out a survey to outline the improvements needed.
Scott Brown, Head of Equity Release Pricing at Aviva, said: “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.
“Given the value in the research being produced, Aviva commit to sharing the output when finalised with the wider industry to support industry level change.”
Craig Calder, head of secured lending at Virgin Money, said: “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.
“Working with industry experts Sero and Rightmove is an opportunity to research, test and learn what consumers want before we take a proposition to market – enabling us to provide a great product for customers while at the same time making a positive impact on the environment.”
Following a six-month discovery phase period, all 26 Green Home Finance Accelerator projects will be able to apply for larger grant awards, between £200,000 and £2 million to enable them to pilot their green finance products and services.