Energy provider E.ON teams up with banking giant BNP Paribas to pilot ‘green mortgages’ that could save homeowners £380 a year.
The aim is to offer homeowners finance via their mortgage of their property. This innovative approach to financing property purchase will mean people who are moving, buying for the first time, or remortgaging their homes will be able borrow more through an ‘energy efficiency home improvement loan’ linked to their mortgage.
It is one of the many arrangements that are on offer for home buyers. To navigate the maze finder UK has a guide to help you better understand how mortgages work and how you should compare the different deals that are out there.
Under the E.ON and BNP Paribas green scheme, the improvement loan financing would come from BNP Paribas Personal Finance and the managed services that install the appropriate energy efficiency solutions would come from E.ON.
According to the innovators, any improvements paid for by the loan could lead to a discounted mortgage rate when the property’s Energy Performance Certificate (EPC) is updated and the energy efficiency measures verified.
The new move comes after Bank of England researchers discovered that people who live in more energy efficient homes pose a lower credit risk.
Their data indicates that about 1.14% of people living in homes that are energy inefficient are in mortgage payment arrears, whereas only 0.93% of people in energy-efficient properties were behind on their payments.
The research concluded that a home’s energy efficiency is “a relevant predictor of mortgage risk”.
According to E.ON and BNP Paribas about 19 million households in Britain fall below the EPC Band C rating and by putting basic measures in place could save up to £380 a year.
E.ON UK CEO Michael Lewis says green mortgages could a “game changer in the delivery of affordable finance”. He is keen for home-owners to step into “energy efficient living”.
Claire Perry, the Minister at the Department for Business, Energy and Industrial Strategy who looks after the clean growth brief, says she is delighted to see businesses like E.ON and BNP Paribas Personal Finance seizing the multi-billion pound opportunity that exists to energise communities into tackling “the very serious threat of climate change”.