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Homeowners Could Slash Mortgage Rates by Making Efficiency Improvements


Homeowners who make energy efficiency improvements to their properties could qualify for reduced mortgage rates, under new government proposals.

The Department for Business, Energy and Industrial Strategy (BEIS) is launching a £5 million fund to help the financial sector develop green financial products like green mortgages.

With these mortgages, homeowners can see discounts on their mortgage rates if they upgrade the efficiency rating of their property. That’s in addition to the savings they’ll see on their energy bills.

Small lenders like Ecology Building Society have been offering green mortgages for a number of years, but they’ve remained a niche product

With Ecology’s mortgages, customers can earn a 1% discount on their borrowing if the savings are used to improve the energy efficiency of the building. This could include installing solar panels on the roof or insulating the loft or walls.

The government hopes this £5 million fund, announced ahead of the launch of its Green Finance Strategy, will incentivise the market to offer more of such products.

However, owners of older homes may find it difficult and expensive to increase their efficiency by enough to earn meaningful discounts on their mortgages.

So the Green Home Finance Innovation Fund (GHFIF) will also support the development of lending products like equity loans and home improvement loans.

The government is also launching a separate £10 million innovation fund for companies which find new cost-effective and scalable ways to retrofit the UK’s old housing stock.

For example, the government said, this could include technology to assemble pre-fabricated roofs or facades off-site and fit them to homes quickly.

This week the UK passed a law committing it to achieving net zero carbon emissions by 2050. Currently, 15% of emissions come from homes, and the government has prioritised improving the energy efficiency of 17 million homes in Britain with EPC ratings below Band C.

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,” he said.

Lauren Smith
Lauren Smith

Lauren Smith has worked as a journalist and copywriter for most of the last decade, covering technology, energy, and consumer rights, in the US and UK.

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