Homeowners could reduce their mortgage rate, save money on their energy bills and reduce emissions from their homes under new government proposals.
A £5m fund has been launched by the Department for Business, Energy and Industrial Strategy (BEIS) to the financial sector to increase the number of ‘green’ mortgages available. Households that successfully upgrade the energy rating of their home will be rewarded with access to discounted ‘green’ mortgage rates.
The government has committed to producing net zero emissions by 2050, and essential to this will be improving the energy efficiency of the 17 million homes currently with an Energy Performance Certificate below band C.
Help for owners of older properties
Currently, green mortgages favour homeowners in new properties who find it easier to make their homes more ‘green’. Older properties can be a challenge to make more environmentally friendly with homeowners unable to increase their rating sufficiently to make any meaningful savings on their mortgage.
BEIS has said that a separate £10m innovation fund will be launched to help the industry find ways to retrofit older properties with environmentally friendly technology, with minimum disruption to homeowners.
Energy and Clean Growth Minister, Chris Skidmore, said: “To fulfil our world-leading commitment to reach net zero emissions by 2050, we need an overhaul of our housing stock to tackle the disproportionate amount of carbon emissions from buildings.
“By rolling out more green mortgages and reducing the costs of retrofitting older homes we’re encouraging homeowners to improve the efficiency of their homes and save money on their energy bills, helping to ensure everyone has access to a warm and comfortable home.”
Where to get a green mortgage
Green mortgages have been available for several years, but have not yet reached the ‘mainstream’, remaining a niche product. They tend to be available from smaller lenders such as the Ecology Building Society, which rewards customers with a 1% discount on their borrowing if it is used to make ‘green’ improvements such as having their loft insulated or solar panels installed.
Barclays launched a green mortgage last year, but it is limited to giving buyers of new-build energy efficient homes access to lower interest rates and is not available to homeowners that improve the energy efficiency of their existing home. And BNP Paribas working in partnership with Eon are developing a green mortgage plan to enable homeowners to extend borrowing on their mortgages with a linked ‘energy efficient home improvement’ loan.
While the government investment will encourage the development of more ‘green’ mortgage products, ultimately it will be down to the consumer and the mortgage market as to whether they will become widely available.
As Paul Broadhead, head of mortgages and housing at The Building Societies Association, said, “A few green/eco mortgages are already available from building societies and over time I anticipate that the opportunities for more will be embraced.
“The primary challenges in the development of such products will be consumer demand – and whether it materialises, coupled with the ability of lenders in a low-interest rate, intensely competitive market to price such mortgages in a way that differentiates them.”