The fund was introduced ahead of tomorrow’s (2nd July) Green Finance Initiative launch and alongside a £10 million competition to reward innovative retrofitting solutions.
The aim of the Green Home Finance Innovation Fund (GHFIF) is to improve the energy efficiency of the 17m homes in the UK with an Energy Performance Certificate (EPC) rating below B and C. Green mortgages give customers discounted mortgage rates once they have upgraded the energy rating of their home.
The £5m will support development of lending products such as equity loans and home improvement loans to help owners to upgrade, for example offering energy efficiency advice, access to trusted installers and preferential mortgage interest rates.
The initiative forms part of the government’s moves to fulfill a long-term commitment to reduce carbon emissions to net zero by 2050.
Lenders and brokers welcomed the initiative, but warned that it would need to suit consumers’ pockets.
Hilary McVitty, head of external affairs at the Building Societies Association, said: “I suspect that green mortgages will become a growth area of the market. From a housing perspective, the government will be concentrating in two spaces – one is new build energy efficiency standards and the other is retrofitting current housing stock to improve energy efficiency. We look forward to seeing the Green Finance Strategy, which we will be studying with a huge amount of interest,”
“In the past we’ve seen properties where the borrower was sold the benefits of solar panelled roofs, only to find that the house was impossible to mortgage,” said Lea Karasavvas, managing director of brokers Prolific Mortgage Finance.
“If the product can be done without detriment to the borrower, I can see it being very popular given society’s concerns about the environment. You only need to look at the boom in growth of electric car sales to see how environmentally aware consumers have become. But if the consumer is penalised and the products are too expensive I fear that cost will win the battle,” he added.
“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 energy bills,” said energy and clean growth minister Chris Skidmore.
“We need an overhaul of our housing stock to tackle the disproportionate amount of carbon emissions from buildings, to fulfill our world-leading commitment to reach net zero emissions by 2050,” he said.
The £10m Whole House Retrofit funds will be awarded for innovative, scaled-up designs for reducing the cost of retrofitting old housing stock, such as offsite assembly of pre-fabricated roofs or facades, which speeds up fitting.
Homes are responsible for 15 per cent of the UK’s carbon emissions.
The Green Finance Strategy commits government to accelerating the development of green financial products.
The government will introduce the Green Finance Initiative and the Green Finance Institute on 2 July in response to the Green Finance Taskforce which published its report last year.