February 23, 2024

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Mortgage rate cut for energy efficient homes under government-backed trials

7 min read
  • 26 innovative green finance projects awarded funding to make it easier to improve the energy efficiency of UK homes by unlocking upfront cash
  • products receiving a share of £4.1 million include mortgages that reward energy efficiency upgrades and loans linked to installing heat pumps
  • retrofitted properties could potentially save more than £460 a year on bills

Homeowners who make their properties more energy efficient could see their mortgage rate cut under a new government-backed pilot.

Perenna Bank will receive more than £193,000 in government funding to help develop their long-term, fixed-rate mortgage that will 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 onto 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.

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.

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.

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, another winning project, 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, one of the winning projects, 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 6-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.

Investments announced today form part of the £20 million Green Home Finance Accelerator, which is funded through the £1 billion Net Zero Innovation Portfolio. Funding will help drive wider government efforts to ensure as many homes as possible reach an Energy Performance Certificate (EPC) band C by 2035, with higher ratings likely to result in lower fuel bills.

Based on a standard occupancy and heating regime, owner-occupiers improving their homes to EPC C could save over £460 a year on their energy bills.

Winners of the awards

  • Aceleron Limited will receive £199,697 to trial an Energy Storage as a Service subscription model for the provision and maintenance of lithium-ion batteries.
  • Arctica Partners Limited will receive £169,210 to investigate a carbon credits financial product which will support home retrofit.
  • Arniston Ltd (trading as Snugg) will receive £170,870 to develop a prototype version of the Green Home Hub to guide customers on the journey from initial enquiry, to developing a retrofit plan, funding the work, engaging with installers and monitoring the results.
  • Ashman Bank Limited will receive £200,000 to design and develop a new variant of buy-to-let to be known as Impact Buy to Let (IBTL), which will be underpinned by an assessment of the retrofit works needed to enhance the energy efficiency of a property.
  • Aviva Equity Release UK Limited will receive £87,612 to design an equity release proposition, targeted as a cost-effective way of funding home improvements to improve the energy efficiency and the EPC rating of customers’ homes.
  • Bankers without Boundaries will receive £99,241 to explore the design of a service which will display homes on a geographic heatmap, highlighting where energy saving returns from retrofits are economically sufficient to support individual consumer investment or how whole areas could be aggregated for a blended return.
  • Chameleon Technology (UK) Limited will receive £155,692 to develop a complete solution which enables homeowners to accurately assess their home energy efficiency and offers a tailored loan product to meet their retrofit needs.
  • City Science Corporation Limited will receive £199,916 to explore ways to provide buy-to-let landlords with a comprehensive solution for upgrading their properties. They have also secured £199,330 to provide, through research and analysis, a clear understanding of the legal and commercial challenges facing the Heat as a Service (HaaS) industry and offer practical solutions to enable the delivery of HaaS in the UK.
  • Clydesdale Bank PLC (trading as Virgin Money) will receive £171,000 to remove the upfront cost barrier to installing retrofit measures facing the ‘able to pay’ market, as well as providing robust technical guidance on appropriate energy efficiency improvement measures to consumers.
  • Cybermoor Services Ltd will receive £56,344 to develop an integrated solution targeting the barriers impacting the uptake of low-carbon heating within the harder-to-reach rural domestic market.
  • E.ON Energy Solutions Ltd will receive £196,921 to develop and pilot innovative green finance products that enable home energy efficiency, low-carbon heating and potentially micro-generation improvements.
  • ELPS Energy Ltd will receive £199,597 to develop an integrated one-stop-shop solution for residential retrofit financing.
  • Energy Saving Trust Enterprises Limited will receive £193,674 to explore a Pathways to Green Finance service aimed at the private rented sector (PRS) looking to retrofit homes.
  • Escrow-Tech Limited will receive £159,040 to create an innovative approach to green home financing as it utilises the potential (or projected) offset carbon from retrofitting activities in adjusting loan rate settings for homeowners thus reducing the cost of home retrofitting.
  • Heat Scheme Limited will receive £116,238 to develop a UK-wide green home finance loan product, for use in bridging the gap between the upfront cost of a gas boiler replacement and the net cost of a heat pump installation after applying a £5,000 Boiler Upgrade Scheme grant.
  • Kamma Limited will receive £200,000 to drive energy efficiency retrofit upgrades in UK properties by developing an online, end-to-end retrofit marketplace connecting homeowners, green finance providers and retrofit installers.
  • Landslide Energy Ltd will receive £126,110 to shorten retrofit payback periods for homeowners who are looking to remortgage and living in properties with an Energy Performance Certificate (EPC) rating of D or lower.
  • Leeds City Council will receive £194,780 to develop a one-stop-shop (OSS) delivery vehicle to create and test green finance retrofit offers.
  • Parity Projects Limited will receive £165,589 to investigate the potential for a sustainable retrofit one-stop-shop that meets homeowner needs and overcomes barriers in the current retrofit journey.
  • People Powered Retrofit Limited will receive £120,911 to develop a mutual, local and trusted one-stop-shop approach to retrofit, combining quality assurance, financing and verification, and setting out replication plans to take advantage of the extensive network of UK Credit Unions.
  • Perenna Bank PLC will receive £193,350 to bring to market a long-term, fixed-rate green mortgage that incentivises homeowners to retrofit by offering to reduce their mortgage rate.
  • Phoenix Group Management Services Limited will receive £102,249 to explore a solution to enable older, less-affluent, homeowners make decarbonising home improvements through using lifetime mortgages.
  • Scroll Finance Limited will receive £136,572 to develop a point-of-sale financing technology solution to be deployed for retrofit decarbonisation projects. They have also been awarded £158,608 to scope, design and test an end-to-end retrofit journey embedded with an innovative and flexible financial product in three pilot areas.
  • Sunsave Group Ltd will receive £196,395 to research the roadblocks that remain for subscription solar PV and to develop a proposition that can be brought to market and rapidly scaled.

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