How banks can accelerate the home energy transition through green mortgages

Despite the urgency to decarbonise homes, the pace of retrofits remains far too slow. Globally, building energy efficiency improvements are advancing at less than half the rate required for net-zero pathways. In Europe, only around 1% of the housing stock is renovated each year, well below the 2.5-3% annual rate required.

Households face well-known barriers, including high upfront costs, long payback periods, limited access to trusted installers, and low awareness of benefits. The current cost-of-living crisis only worsens these challenges, leaving many understandably hesitant to take on more debt. This makes reducing upfront costs critical, and highlights why green mortgages can be such a powerful tool to accelerate the transition.

Investment required to support the transition

The International Energy Agency estimates that clean energy investment in buildings must triple by 2030, reaching $1.6 trillion annually to stay on track for net zero. In Europe alone, home renovations will require an additional €275 billion every year this decade. Public funding cannot meet this demand on its own. Banks, with their central role in household finance, are uniquely positioned to help, through green mortgages, retrofit loans, and bundled financing models that lower upfront costs and spread repayments over time.

The current state of green mortgages

So far, however, most green mortgages have fallen short of this potential. In the UK, for example, the majority reward households that already live in efficient homes, typically by offering preferential rates for properties with an EPC rating of A or B. While this may encourage greener property choices, it does little to improve the energy performance of the existing housing stock. These products also risk being seen as greenwashing if they are counted towards climate commitments without delivering real carbon reductions. With most of the buildings that will stand in 2050 already built, and renovation rates stuck at around 1% per year, the real opportunity lies in transition-based mortgages that actively finance retrofits and energy upgrades.

Transition-based green mortgages are designed to finance improvements, not just reward efficiency. For example, banks could offer retrofit-linked mortgages that lower rates when a home’s EPC rating is improved within a set timeframe, or bundle the cost of upgrades like insulation, heat pumps, or solar into the mortgage so repayments are spread over its term. Other models might link incentives to specific improvements, reflect post-renovation value in lending decisions, or use predicted energy savings to offset repayments. By shifting to these approaches, banks can make retrofits more affordable and accessible, while directly contributing to the decarbonisation of existing housing stock.

Personalisation is key to unlocking the potential of green mortgages

Households vary widely in their property types, financial situations, and knowledge of energy efficiency, yet most current green mortgage offerings take a one-size-fits-all approach, offering a flat discount rate tied to EPC ratings. By tailoring offers to individual circumstances, for example, linking finance to the most impactful upgrades for a specific home, adjusting incentives to reflect payback periods and bill savings, or providing a clear, personalised retrofit pathway, banks can transform green mortgages into solutions that feel relevant and actionable. This not only builds trust and confidence for households but also strengthens customer engagement.

How Cogo helps banks drive the home energy transition

Cogo’s Electrification solution equips banks with a tool that shows customers the most impactful upgrades for their home alongside the costs, carbon savings, and potential bill reductions. The tool integrates green financing directly into the user experience, showing how loans or mortgage adjustments can reduce upfront costs and shorten payback periods.

For households, this builds confidence to act by showing tangible financial and environmental gains. For banks, it creates new lending opportunities, reduces credit risk as housing stock becomes more energy-efficient and resilient, and strengthens trust by positioning the bank as a partner in the transition to net zero.

Conclusion

The home energy transition is one of the defining challenges of our time, and banks have an important role to play in making it happen. While today’s green mortgages have raised awareness, they are not yet shifting the retrofit market at scale.

By moving from rewarding efficiency to financing improvement and by embedding personalised insights that guide customers on their unique retrofit journey, banks can unlock the potential of green mortgages. In doing so, they will not only help households cut costs and emissions but also strengthen their own position as enablers of the net-zero economy.