Households could be rewarded with cheaper mortgage rates by reducing energy consumption under a new initiative.
The government has announced a £5 million fund to help the financial sector develop green home finance products such as green mortgages.
With a green mortgage, homeowners could receive discounted rates once they have upgraded the energy rating of their home.
The initiative would help benefit the 17 million homes in the UK with an Energy Performance Certificate rating in the least efficient bands below C.
Currently homes are responsible for 15% of the UK’s carbon emissions.
Chris Skidmore MP, minister for energy and clean growth, says: “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.”
Companies are also being offered the chance to win a share of a £10 million innovation fund if they design innovative ways of reducing the cost of retrofitting the UK’s old housing stock.
This could include assembling parts of buildings like pre-fabricated roofs or facades off-site and quickly fitting them to homes to minimise disruption for homeowners.
The news comes ahead of the launch of the Green Finance Strategy on Tuesday, which sets out the government’s long-term plans to boost the take-up of green finance.
Last year, Barclays launched a green mortgage giving buyers of new-build energy efficient homes access to lower interest rates. It was awarded the Moneywise Mortgage Award for Innovator of the Year.
While the number of lenders offering green mortgages is growing, they remain a niche product.
The government hopes to use green mortgages to incentivise people to make their homes more energy efficient.
Banks might be willing to offer like lower interest rates to owners of energy-efficient homes.
The reasoning behind this is that as homeowners pay lower bills with an energy efficient home they will be less likely to default on their mortgage payments.
Energy efficiency grants
There are grants available if you are looking to make your home more energy efficient.
The government’s Energy Company Obligation energy efficiency scheme is designed to help reduce carbon emissions and tackle fuel poverty by helping the most vulnerable in society.
Under the scheme, gas and electricity suppliers are obliged to help low-income households with energy efficient measures, including cavity wall insulation and boilers.
You can find out if you qualify by calling Energy Saving Advice Service on 0300 123 1234.