Your mortgage will be cheaper – as long as you buy a heat pump, Government says
Homeowners who install heat pumps and insulation in their homes are to be offered lower mortgage rates as part of a number of Government-backed schemes.
The Department for Energy Security and Net Zero will hand £4.1m in funding for several pilot schemes aimed at reducing household carbon emissions.
This will include funding small lenders to offer cut-price loans to customers who make green improvements to their homes, in an effort to boost “green financing”.
The scheme also includes funding for trials which will allow buy-to-let-landlords to borrow money for eco improvements – such as home batteries – and add it to existing borrowing.
Another mortgage aimed at landlords will offer landlords analysis on how to improve their property to meet net zero demands.
The Government is trialling 26 projects aimed at boosting the appetite for eco upgrades among homeowners in total.
This will include allowing homeowners to use equity release, or “lifetime mortgages” to take cash out of the value of their homes to finance green improvements.
Other projects include an employee benefit scheme which will allow employers to provide interest-free loans to staff to install heat pumps.
By 2025, all rented properties will be required by law to have an Energy Performance Certificate Rating of C or face a fine of £30,000. Houses in Britain produce 58.5m tonnes of CO2 every year, more than all the country’s cars, according to the National Housing Federation.
But homeowners have raised concerns about prohibitive costs of meeting the new standards, with heat pumps costing in excess of £10,000 in some cases – far more expensive than the cost of a modern-day boiler.
Lord Callanan, Minister for Energy Efficiency and Green Finance, 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 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.”
Paying for measures such as loft insulation or double glazing could save households £460 a year in energy bills, the Government said.
It comes as interest rates have hit their highest for 15 years, adding to mortgage bills for millions.
A number of major lenders including Natwest, Halifax and Barclays already offer “green mortgages” to reward house buyers for moving into energy-efficient new-builds or making green improvements to their homes.
While the loans are typically marginally cheaper than the lenders' core offerings, such deals rarely compete with the best rates on the market. This raises questions as to how popular their uptake will be.
Nick Mendes of John Charcol, a mortgage broker, said: “Borrowers should not assume that opting for green will mean they get the best rate. Most market-leading deals will be on non-green products.”
Nationwide this week said it would start offering interest-free loans of up to £15,000 to borrowers to make energy improvements.
A £5,000 government heat pump grant is already available for households to replace their gas boiler, however, takeup of the scheme has been lower than anticipated.
