Mortgage Rate Reductions For Energy Efficient Homes

by | Tuesday 23rd May 2023 | Mortgage News

Possible rate reductions for energy efficient homes

Possible rate reductions for energy efficient homes (Source: Daily Express)

A newly announced government initiative could see lenders providing mortgage rate reductions for energy efficient homes or homeowners who are willing to make improvements to their existing properties, making them more energy efficient. With the average mortgage rate between 4% and 5% nowadays, rate reductions of any kind are welcomed by most borrowers and the added benefit of being more eco friendly is the icing on the cake.

Government Funding For Energy Efficient Homes

This week the government have announced that they will be awarding £4.1 million to green finance projects to help people make their homes more energy efficient across the country. According to the website, the Department for Energy Security and Net Zero will be awarding 26 innovative green finance projects funding to make it easier to improve the energy efficiency of UK homes by unlocking upfront cash.

Products receiving a share of the £4.1 million of funding include mortgages that reward energy efficiency upgrades and loans linked to installing heat pumps by offering lower interest rates and other incentives. According to the Department for Energy Security and Net Zero, retrofitted properties could potentially save more than £460 a year on bills, leaving thousands of people much better off per month.

Mortgage Rates Cut For Energy Efficient Homes

Residential Properties

The government website goes on to say that people who already own their own properties and make their properties more energy efficient could see their mortgage rate cut under a new government-backed pilot. Lender Perenna Bank, a non high street lender but green mortgage specialist, will supposedly receive more than £193,000 in funding to help develop their long-term, fixed-rate mortgage that will incentivise customers to make their homes more energy efficient by offering a reduced mortgage rate.

Buy-To-Let Properties

Buy-to-let investment properties won’t be left out with the new government initiative either. The government have made a proposal for a funding trial that will see buy-to-let landlords add the cost of making properties more energy efficient onto their mortgage. This hypothetically will enable landlords to borrow more money for these property improvements and wrap them up into their monthly mortgage repayments, rather than having to pay for them separately.

Ashman Bank, another non high-street bank, will be awarded £200,000 to design and develop this scheme, 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.

Full List Of the Newly Funded Energy Efficient Projects

Here is a full list of the project which are receiving a share of the new government funding initiative. This list can be found also on the website

  • 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.

Have an Energy Efficient Home or Looking to Make Some Improvements?

If you currently have a property that is classed as energy efficient, you may be able to benefit from a lower mortgage rate with a green mortgage product. If you like the sound of these new initiatives and projects and think that you might want to make some improvements yourself, then please feel free to give us a call to see what might be possible. Our team of specialist mortgage brokers and here to help. Call us or send us an email today.

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