Green mortgages with discounted rates trialled to tackle barriers to housing retrofit

• The Department for Energy Security & Net Zero has awarded funding to a consortium led by digital mortgage provider, Perenna, to create consumer-friendly green finance products
• The funding, awarded as part of the Green Homes Finance Accelerator, will support the development of a long-term, fixed rate green mortgage specifically aimed at incentivising retrofits
• The project will be delivered by Perenna, Energy Systems Catapult, and Heatio

Digital mortgage lender, Perenna has partnered with Energy Systems Catapult and Heatio in a bid to overcome the barriers faced by consumers when retrofitting their homes and to transform the UK’s £316 billion mortgage market.

The consortium is testing consumer appetite for the provision of a 20–30-year fixed rate green mortgage that rewards homeowners for retrofitting their home with low carbon technologies and upgrading the fabric of their home.

With 23% of the UK’s carbon emissions stemming from housing alone, Perenna’s green mortgage offering would spur on a national retrofit drive and help meet our Net Zero by 2050 ambitions. The proposition would be designed to boost awareness of retrofit measures and instil confidence in homeowners that measures they adopt will produce a financial saving.

Perenna intends to bring green mortgages to market, funded through the issuance of green covered bonds. Investors would have access to data that verifies that the proceeds of the bond investments have been used to generate significant reductions in energy consumption. Homeowners that successfully retrofit their properties would receive a discount on their mortgage rate across the lifetime of their agreement.

The project will bring together two key strands of work: consumer research, and modelling and data collection. With experience in developing consumer-friendly products such as Heat-as-a-Service (HaaS) and a dedicated consumer insights team, Energy Systems Catapult will be responsible for project management and will take the lead in building understanding of customer requirements. The Catapult will also provide retrofit modelling of different housing archetypes relevant to the proposition to support product refinement and strategy.

Perenna’s customers will benefit from the insights provided by the gathering of real life home data instead of a traditional survey approach. Heatio will install their Home Energy Management System (HEMS) which will combine smart meter data, artificial Intelligence, discreet sensors, machine learning, and intelligent business modelling. This will give an accurate and clear energy profile for customers’ homes and a roadmap of improvements and technology recommendations. Once installed the HEMS will validate the energy reductions in the home and connect renewable technologies for demand flexibility services.

The project aims to measure the baseline thermal performance of a property pre and post retrofit, to determine that there has been a reduction in primary energy demand and thus providing investors with evidence that their financial support is helping to lower carbon emissions.

The project has been supported by the Department for Energy Security & Net Zero (DESNZ) as part of the department’s Green Homes Finance Accelerator (GHFA) which aims to provide innovation funding for the development of green finance products which can enable uptake of home energy efficiency and low carbon heating measures.

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 these 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”.

Becky Sweeney, Business Leader – Homes, at Energy Systems Catapult, said: “Much work has been done on developing low carbon technologies to help homes across the UK lower their emissions. However, these products are out of reach financially for many homeowners. We’re putting barriers to affordable retrofit in our crosshairs. This project aims to reshape how we approach home decarbonisation by raising awareness of the benefits of retrofit and helping homeowners access the upgrades and technologies they need in a financially sustainable manner.

“It’s inspiring to see innovative companies from different fields working in collaboration to tackle a common problem – Perenna offering long term, good value mortgage deals at reduced rates linked to energy reduction and carbon savings that will be validated by Heatio, with their in-home hardware and novel approach to proving the effectiveness of the measures.

“This transformative project will help to unlock the UK’s decarbonisation potential, streamline consumer engagement, and give investors the confidence they need to invest in the green transition.”

Arjan Verbeek, CEO at Perenna, said: “We are excited to start working on this project with the great teams at Heatio and Catapult. Perenna’s ambition is to use our unique funding model to help homeowners across the country realise the benefits of retrofitting. Achieving this aim requires collaboration, and the DESNZ project gives us an opportunity to work with industry experts to develop a truly innovative green mortgage proposition.”

Simon Roberts, MD at Heatio, said: “We are absolutely delighted to have the opportunity to work alongside Perenna and Energy Systems Catapult on such an exciting programme on the UK’s energy transition. This project will allow us to utilise Heatio technology to drive consumer confidence and decision making with a data driven approach. We are thrilled to be able to develop our Home Energy Management System alongside such a fantastic green finance innovation.”