The government has launched a new scheme that aims to help more homeowners improve the energy efficiency of their homes.
The Green Home Finance Accelerator will see £20 million made available to banks and building societies.
Lenders will then use the funding to develop affordable loans for homeowners to use for green home improvements.
What is the Green Home Finance Accelerator?
The government describes the scheme as a way to encourage lenders to innovate in the green finance market so families can lower their energy bills and reduce their carbon emissions.
Lenders can apply for funding to develop, test, and pilot finance products. The products will be specifically for people who want to overcome the upfront costs of green home improvements.
The scheme also aims to boost knowledge and understanding about how energy efficiency can make homes cheaper to run.
How could the scheme help you?
At the moment, the funding is being rolled out to banks and lenders - so it’s not a scheme that you can benefit from straight away.
But it will hopefully make it easier and cheaper for you to access home improvement loans in the future.
Making energy efficient home improvements can help you save on energy bills and reduce your carbon footprint.
Plus, green home improvements can add 5% to your home’s value, according to the government.
And if you’re thinking about selling your home, a better EPC rating could help you sell faster.
Our data shows that homes with an EPC rating of A or B are selling twice as fast as they were in early 2018, taking 28 days compared to the previous 56.
What’s the background?
A huge proportion of UK housing stock is currently underperforming when it comes to energy efficiency. Our data shows that only 3% of older homes have an EPC rating of A or B, and the average rating is D.
This is despite applications for projects involving insulation rising by half and those involving solar panels rising by two-thirds between 2019 and 2021, according to Barbour ABI.
That means most of us are still living in homes that are expensive to heat and wasteful of energy.
Upgrading an old home comes at a significant cost. The expected cost of retrofitting the UK’s housing stock is measured in hundreds of billions of pounds over the next 20 years, says Barbour ABI.
For an individual household, the average cost of installing a cavity wall, loft insulation and floor insulation comes in at around £6,500.
Those measures could save £300 a year on energy bills, according to the government.
But it will be difficult for many homeowners to foot the upfront bill for green improvements in the face of rising living costs and high mortgage rates.
So this scheme is a welcome move if it can help decarbonise the UK housing market.
Affordable upfront lending will help more people cut their carbon footprint and reduce the overall emissions from UK housing.
What’s next in the green home movement?
“The big challenge for the government is how to encourage homeowners to upgrade the energy efficiency of their homes as the payback for green investment can be many years, which acts as a disincentive,” says Richard Donnell, Director of Research and Insight.
“Higher energy bills will be getting households to consider some of the basic home improvements like draught proofing, loft insulation, double glazing and heating system upgrades.
“At the moment the value of your home and the ability to get a mortgage are not linked to the energy rating of your home. This will start to change in the coming years. The government is keen to see energy ratings have ‘financial consequences’ for owners.
“Lenders and regulators are starting to look more closely at climate risks and the cost of finance.
“In the future, the price you pay for your mortgage may become linked to the energy rating and carbon emissions it generates. This is something we are likely to see in the next 2 to 5 years, so it’s all the more important that homeowners prepare by understanding their home on a closer level.
“Looking at its energy efficiency and how you could improve it is an excellent start as, in the coming years, it could make a noticeable difference to the value of your home and its saleability in future, especially as the average homeowner moves once every 20 years.”