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How Energy Efficiency Could Reduce Your Mortgage

3 min

A government-backed pilot could reward homeowners who make their properties more energy efficient by cutting their mortgage rate.


Through The Green Home Finance Accelerator: Discovery Phase, a share of £4.1 million total funding has been made available to 26 green finance projects with the aim to improve the energy efficiency of UK homes.

All 26 projects will be able to apply to progress to a 15-month Pilot Phase later this year, which will award a further grant ranging between £200,000 and £2 million to enable them to pilot their green finance products and services.

The projects all share the same goal

Various projects have received funding, including Ashman Bank, who have been awarded £200,000 to design and develop a buy-to-let mortgage which will add the cost of retrofitting properties onto their mortgage, enabling them to borrow the money necessary to make energy efficient improvements and include it in their monthly repayments.

Perenna Bank will receive over £193,000 to help incentivise homeowners to retrofit their home by developing a long-term, fixed-rate mortgage which will offer reduced rates to those who make their properties more energy efficient.

Also receiving £200,000, Kamma Limited will develop an online retrofit market place that connects homeowners to green finance providers and retrofit installers, allowing them to customise retrofit packages to their home and goals.

Also receiving funding is Aviva Equity Release UK Limited. 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.”

Their project will use its £87,612 grant to design an equity release proposition, or Lifetime Mortgage, which will help to fund home efficiency improvements.

The project particularly targets later life households, enabling those residents to make improvements to their homes that will both make them energy efficient and more comfortable to live in.

He added: “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.”

Heat Scheme Limited will use their funding of £116,238 to develop a UK-wide green home finance loan product, with the aim to bridge 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.

While the projects differ in individual targets, all share the aim to help and encourage and incentivise homeowners to introduce energy efficiency measures into their homes, such as loft insulation, double glazing, and heat pumps.

The government is committed to achieving energy efficiency goals

Minister for Energy Efficiency and Green Finance, Lord Callanan, 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.”

Improving homes to at least EPC C could result in a saving of over £460 a year on household energy bills, as well as progressing towards the government’s target to ensure all residential properties reach a minimum EPC C by 2035.

The Green Home Finance Accelerator has access to a total of £20 million through the £1 billion Net Zero Innovation Portfolio, which aims to decrease the costs of decarbonisation and enable the UK to end its contribution to climate change. One of the ten priority areas of the Portfolio is the decarbonisation of homes.