Mortgage rates to be slashed for green homes

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. 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.
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.