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Green mortgages, which reward homeowners who improve the energy rating of their properties with discounted rates, have been given a boost in the form of a £5 million government fund.  

The Green Home Finance Innovation Fund will be used to help the financial sector develop environmentally-friendly mortgage products. These could include home improvement loans, which come with energy efficiency advice and access to approved installers.

Ministers announced the fund after the government committed the UK to achieving net zero emissions by 2050, in an effort to address a global warming climate emergency.  

Domestic properties are currently responsible for about 15% of the UK’s carbon emissions. Achieving a reduction will require improvements to the energy efficiency of 17 million homes with an Energy Performance Certificate below band C.

In a separate announcement, the government has pledge to create a £10m fund to encourage innovative ways of retrofitting old housing stock with energy efficient adaptations.  

Energy and clean growth minister, Chris Skidmore, said: "To fulfil our world-leading commitment to reach net zero emissions by 2050, we need an overhaul of our housing stock to tackle the disproportionate amount of carbon emissions from buildings.

"By rolling out more green mortgages and reducing the costs of retrofitting older homes we’re encouraging homeowners to improve the efficiency of their homes and save money on their energy bills, helping to ensure everyone has access to a warm and comfortable home."

Paul Broadhead, from the Building Societies Association welcomed the move: "A few green and eco mortgages are already available from building societies and over time I anticipate that the opportunities for more will be embraced. The financial risks to lenders relating to climate change are becoming steadily better understood and we are working closely with both the Prudential Regulatory Authority and the Financial Conduct Authority to manage this."

Read more about this story on the FT Adviser website.