The Green Deal explained Green Deal Finance - paying for the Green Deal
The government's flagship energy-efficiency programme, the Green Deal, ended in July 2015. This was due to government concerns about low take-up and industry standards.
But while the government cash has stopped, there are still other ways to fund energy-efficient home improvements.
Find out more about why the Green Deal closed and what government-led energy-efficiency schemes are still available.
Alternatives to a Green Deal loan
There were many different stages to the Green Deal - from having a Green Deal assessment, to taking out a Green Deal loan and then repaying it through your electricity bills.
However, there have always been alternative ways you can pay for energy-efficient measures. We've outlined these, below, along with their advantages and disadvantages:
- Using your savings - you would have benefited from energy savings straight away as there are no repayments. However, this may have restricted you to cheaper home improvements.
- Using an unsecured loan - you may have got a better interest rate than with one of the old Green Deal loans. But the loan was attached to you, not your property, and likely to have been shorter term with higher repayments.
- Increasing your mortgage - you may have been able to get a better interest rate as mortgages are long-term loans. However, there are no guarantees that the costs will be met by an equivalent increase in the value of your property.
- Using a credit card - you could have taken advantage of 0% interest deals and then transferred your balance over to a different credit card once the deal had expired, plus your installations will have been covered by section 75 of the Consumer Credit Act. Remember, if you don't pay off your balance in full or transfer in time, interest rates can be steep. Plus, you may not have been able to get a big enough credit allowance to pay for certain measures.
Trying to find the best credit card? The Which? Money Compare comparison tables let you search hundreds of credit cards to help you choose the most suitable deal for you based on quality of service as well as cost and benefits.
Green Deal loans
The aim of a Green Deal loan was to help spread payments for the upfront cost of measures such as solid wall insulation, boilers and double glazing.
It worked differently to a loan from a bank or other credit provider:
- Green Deal loan repayments were added to your electricity bill. You repaid the loan through your electricity bill payments (by direct debit, for example).
- One of the key aspects of the Green Deal was the 'Golden Rule' – loan repayments should never have exceeded the savings you made on your energy bills. So, in theory, you should have seen no increase in your electricity bills.
- However, the Golden Rule was not a guarantee that your bill savings matched your loan repayments. It was based on estimates of a typical household's energy usage and savings, and didn't take into account future energy price rises.
- Your lender was your Green Deal Provider. It decided on the terms of your loan, such as how much you could borrow (there was no limit), how long you could borrow for, and the rate of interest.
- The loan was attached to the property you lived in, not you. If you sold your home, it would pass on to the new owner.
Green Deal interest rates
The interest rates on Green Deal loans varied. It depended on which energy-efficient measure(s) you chose to install in your home, how much finance you required and which company you used to take out your loan.
There were no concrete limits for the size of the loan or the minimum and maximum lengths of loans - this depended on the company you took out your loan with.
However, the Green Deal Finance Company published a list of example loans - the interest rates range from 7.9% APR to 10.3% APR. These example loans were between 10 and 25-years long.
According to the Green Deal Finance Company, there was a one-off loan fee of £63 and a £20 annual finance charge for every loan that was taken out. Green Deal providers had the option of absorbing this cost, or passing it on to you.
Depending on how much money you borrowed, this extra fixed fee could have had a big impact on the interest rate that you paid on your Green Deal loan.
Paying off a Green Deal early
As a result of Which?'s campaigning, on 16 May 2014 the Green Deal Finance Company announced it was removing any early repayment fees for future Green Deal loans taken out with it. The Green Deal Finance Company also promised to work to try to encourage other Green Deal providers to waive early repayment fees for existing Green Deal loans.
If you took out a Green Deal loan before this date, you can still pay it off early, but you may incur a fee. If you took out a Green Deal loan for less than £8,000 over less than 15 years, there are no early repayment charges. For some providers, early repayment fees will be small when the Green Deal plan duration is 15 years or less and over £8,000 (up to a max of 1% of the loan). But for Green Deals of longer than 15 years, there is a maximum charge of £6 for each year left on the loan for every £1,000 you want to repay early.
Green Deal Home Improvement Fund
The Green Deal Home Improvement Fund (GDHIF) gave you the chance to claim cashback for installing energy-efficient measures to your home.
The scheme was relaunched in December 2014, after the original fund ran out in July 2014. The government announced that money would be released to the fund every quarter, with details of each release being announced periodically. It has now closed, although existing vouchers will still be valid.