UK Finance urges government to ignite demand for green home upgrades

UK Finance has issued a fresh call for government-led action to boost consumer demand for green home improvements, warning that Britain’s climate goals risk falling short unless more is done to persuade homeowners and landlords to upgrade their properties.

In a new report – Unlocking Demand for Green Home Finance – the banking industry body sets out a nine-point strategy to be embedded within the government’s forthcoming Warm Homes Plan.
The recommendations include greater financial incentives, a nationwide public awareness campaign, and clear long-term policy direction.

The push comes amid stubbornly low adoption of energy-saving technologies such as heat pumps, insulation and solar panels.

HIGH UPFRONT COSTS

Despite government targets to install 1.5 million heat pumps annually by 2035, uptake remains well below this level.

According to YouGov research commissioned by UK Finance, over half of consumers (54%) cite high upfront costs as the main deterrent, while 44% say they would be more likely to switch if they had a clearer picture of potential savings on energy bills.

UK Finance argues that the current market conditions – rising energy prices, growing environmental awareness, and a maturing green finance sector – create a strong opportunity for change. But it says a coordinated national strategy is now essential to move from inertia to action.

OPPORTUNITY TO MAKE A DIFFERENCE
Ian Bhullar, Director of Sustainability Policy at UK Finance
Ian Bhullar, UK Finance

Ian Bhullar, Director of Sustainability Policy at UK Finance, says: “To meet our ambitious targets on greening the UK’s housing stock we need to drive demand and convince the public of the benefits.

“Lenders are committed to playing their part and through the government’s Warm Homes Plan we have the opportunity to really make a difference.

“Increasing demand for green home improvements will bring significant benefits, stimulate job creation, drive innovation, and reinforce the UK’s energy security in an increasingly volatile global market.”

The report’s nine recommendations call for the creation of a government-led body to coordinate stakeholders across finance, construction, and energy. It also urges ministers to provide clear policy certainty for retrofit firms, introduce updated energy performance metrics, and rebalance energy prices by adjusting levies on electricity and gas to better reflect their environmental impact.

In addition, the report highlights the importance of consumer confidence. It advocates for a trusted national information campaign – delivered by an independent source – to counter misinformation and provide households with impartial guidance on retrofit options.

UK Finance also wants to see more direct financial support to stimulate the market. This includes grants and subsidies for green improvements, alongside the deployment of government funds to enable more affordable green lending products.

NET ZERO STRATEGY

The Warm Homes Plan, expected later this year, is anticipated to be a cornerstone of the government’s broader net zero strategy – with residential properties accounting for around 20% of the UK’s carbon emissions. Industry groups, however, have warned that past retrofit schemes have suffered from short-termism and lack of coordination, leaving many households confused and disengaged.

UK Finance’s intervention reflects mounting pressure on policymakers to match ambition with delivery.

With households facing a cost-of-living squeeze and an ageing, energy-inefficient housing stock, the challenge is as much behavioural as it is financial – and one the government cannot meet alone.

ONE-SIZE-FITS-ALL WILL NOT WORK
Toby Leek, Propertymark
Toby Leek, Propertymark

Toby Leek, NAEA Propertymark President, says: “Propertymark has always advocated for low-carbon heating systems that include heat pumps as a central component of achieving net zero.

“However, it is clear that costs are a barrier for many people when it comes to switching to these low carbon alternative means to heat their homes.

“There are many government schemes out there, such as the Boiler Upgrade Scheme that gives households in England and Wales £7,500 towards replacing their old boiler system with a heat pump.

“At the same time, it is vital that the UK Government and the devolved administrations avoid a one-size-fits-all approach towards energy efficiency, as for example, older properties are not always able to add heat pumps, something that Propertymark will continue to campaign for.”

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