A bank will offer a mortgage rate cut for customers that make their homes more energy-efficient under one of a number of trials being backed by the government, which also includes home energy efficiency pilot schemes from Aviva PLC (LSE:AV.) and Virgin Money UK PLC (LSE:VMUK).
For any of the trials that prove encouraging after their first six-month 'discovery phase' they will be able to apply for larger grant awards of between £200,000 and £2mln to expand their pilots.
One successful applicant is banking startup Perenna Bank, which will get more than £193,000 in funding to help develop its planned long-term, fixed-rate mortgage designed to incentivise customers to make their homes more energy efficient by offering a reduced mortgage rate.
Under Virgin Money's pilot scheme, the FTSE 250-listed bank will receive £171,000 to test a product where it will carry out surveys of select mortgage clients' properties to outline potential 'bespoke' energy efficiency improvements needed.
It is partnering with online portal Rightmove and green tech specialist Sero in what Virgin Money calls Project POWER, aiming to "educate customers on the bespoke retrofit options available to decarbonise their home and the benefits of doing so, while also providing affordable finance options to implement the changes".
As for Aviva, its equity release arm will get £87,612 to design a service that allows homeowners to access equity in their property through a specialist lifetime mortgage, "freeing up cash to improve the energy efficiency of their homes".
Fellow life insurer Phoenix Group Holdings PLC (LSE:PHNX) is getting £102,249 to test a lifetime mortgage product for older, less-affluent, homeowners who make decarbonising home improvements.
These were among 26 small green finance trials that were successful in bidding for a total of £4.1mln of government money.
Ashman Bank, another startup that gained its banking licence last year, will be awarded £200,000 to design and develop a trial where buy-to-let landlords can add the cost of making properties more energy efficient onto their mortgage. After assessing a property’s energy efficiency, options will be suggested on how it can be improved and the cost of carrying out the work incorporated into the duration of the mortgage.
There were also non-financial companies that won places in the accelerator programme, including Sunsave Group researching the 'roadblocks' holding back the subscription solar PV market, and potentially developing what products could be brought to market and rapidly scaled.
Many of the trials are by organisations – Arctica Partners, Arniston, Bankers without Boundaries, Chameleon Technology, ELPS Energy, Escrow-Tech, Kamma Ltd, Landslide Energy, Parity Projects, People Powered Retrofit, Scroll Finance and Leeds City Council – investigating the retrofitting market, such as potential financing solutions, ways of analysing the potential benefits of retrofitting, or how offsetting carbon from retrofitting activities could be used to adjust loan rate settings for homeowners.
** Updated with more detail **