House buyers could get bigger mortgages if they buy more energy efficient homes under a government-backed pilot scheme.
Monmouthshire Building Society will offer mortgages that take energy efficiency into account for new build homes at two new low energy developments in Wales, as well as existing homes in the surrounding area that want to make improvements.
Taking lower home energy bills into consideration could potentially increase the maximum affordable mortgage by up to £12,000 for a very low energy home.
“Residential buildings are a major source of carbon emissions; moving zero-carbon standards in both new stock and by retrofitting existing buildings is critical to addressing climate change,” said Sarah Sayce, of the University of Reading, who is advising on the project.
One of the developments that will be included in the scheme is Parc Eirin, a neighbourhood of 225 homes in the Ely Valley in South Wales that are designed to be low carbon.
All of the homes, which start from £130,000 for a two bedroom flat, use ground source heat pumps and have electric vehicle charging points, and most have solar panels.
The pilot scheme will be used to inform mortgage limits that could be offered on a wider scale in a growing field of green financing.
It is one of several projects designed to cut carbon emissions in a new £80m fund by the Department for Business, Energy and Industrial Strategy, including £1.8m specifically for green home finance.
Among the others is a project to harness geothermal water sitting in disused mines to heat 1,250 homes.
But there were warnings that the £80m scheme was merely a drop in the ocean of what is needed to improve energy efficiency in buildings, which account for 18 per cent of the country’s carbon emissions.
The government’s climate change advisers have warned that millions of homes will require expensive retrofitting.
Boris Johnson committed to a £9bn home insulation project during the election last year, but his chief adviser Dominic Cummings has pushed back against the scheme, the Financial Times reported this week.