Homeowners taking out a Lloyds mortgage can now get their heating upgraded for free.
The bank has partnered with Octopus Energy to cover the full cost of installing an air-source heat pump, the first time a UK lender has bundled such a green incentive into a mortgage.
The move marks a major step in how banks are helping Britain meet its climate goals, as government schemes struggle to spark enthusiasm for low-carbon heating.
A first for UK mortgages
From this week, Lloyds Bank customers who apply for a mortgage can also apply for a free heat pump installation, provided their home has a C or D-rated EPC.
The offer is part of a limited-time partnership with Octopus Energy and runs until November 24. Eligible borrowers must also qualify for the government’s Boiler Upgrade Scheme, which provides £7,500 towards the cost of installation.
While other lenders, including Barclays and Nationwide, have offered cashback or low-interest “green loans,” none have gone as far as to fully cover air-source heat pump costs, making this a genuine market first.
A push to revive Britain’s heat pump drive
Despite generous subsidies, heat pump installations have lagged behind government ambitions.
Britain has only around 19 heat pumps per 1,000 homes, far fewer heat pumps than many European nations, and ministers have already scaled back earlier pledges to install 600,000 units a year by 2028.
By linking the technology directly to home finance, Lloyds hopes to remove one of the biggest barriers, the upfront cost, while also gathering data on whether mortgage-linked incentives can speed up green retrofits.
What it means for homeowners and rivals
For eligible borrowers, the offer could save thousands of pounds on installation and lower their energy bills over time.
But analysts say the move also signals a shift in how Britain’s high street banks view their role in the net zero transition, from simply rewarding efficiency to actively funding it.
“This marks a turning point for mainstream lenders,” said Sarah Coles, head of personal finance at Hargreaves Lansdown. “Banks are starting to see home energy upgrades not just as environmental add-ons, but as a way to future-proof their loan books.”
Competitors are expected to watch closely. With rivals like Barclays, Santander and Nationwide already experimenting with smaller “green mortgage” perks, Lloyds’ partnership with Octopus Energy could set off a new phase in the race to make home finance more sustainable.
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