The Green Deal explained What is the Green Deal?
News Update: on 24 July 2014 it was announced that the Green Deal Home Improvement Fund has been closed. A surge of applications has meant that the £120m fund has already been claimed. Find out more here.
The Green Deal is a new way to pay for energy-saving home improvements. You can take out Green Deal finance to pay for measures such as loft, cavity or solid wall insulation, double glazing, a new boiler or even a 'micro-generation' system such as solar panels. The loan is repaid through savings made on your electricity bills, therefore your bills shouldn't be any higher than usual. Once the loan is paid off you can take full advantage of the energy savings.
Video: how does the Green Deal work?
The Green Deal process has four steps: assessment, finance, installation and repayment. Find out more in our animation below.
How do I get started?
If you're interested in a Green Deal loan, you will first need to arrange a visit from an assessor accredited with the Green Deal Quality Mark. All companies involved in the Green Deal must bear this mark and comply with a code of practice.
Green Deal providers include energy companies, shops and companies that install energy efficient technology. The provider will offer you a quote for a Green Deal plan. You could be expected to pay around £100-£150 for an assessment.
See our Green Deal FAQs page for an explanation of all the Green Deal terms above.
How is the Green Deal different?
In the past, insulation has been available free of charge or heavily discounted through schemes funded through everyone’s energy bills. The most recent free insulation scheme (Cert) finished in December 2012 but some energy companies still have offers - check our round up of the top free and cheap insulation deals to track down the best.
The Green Deal differs significantly from old energy schemes, as it can involve taking out a loan to help pay for the energy-efficient measures. The loan is paid back through your electricity bill and is attached to your electricity supply, rather than you as an individual. This means that if you move, it will pass on to your home's next owner.
We explain how the Green Deal works in more depth, below - or you can go straight to the home improvements covered by the scheme. The Green Deal is a complex product so make sure you research it well.
How can I claim Green Deal cashback?
The Green Deal Home Improvement Fund was launched in June 2014, replacing the old cashback scheme. You now have the chance to claim up to £5,600 back for installing energy-efficient measures. This figure is made up of up to £4,000 for installing solid wall insulation, up to £1,000 for installing two out of a set list of 11 energy-efficient measures, up to £500 for installing measures within a year of moving into your property, and up to £100 to cover the cost of the Green Deal Assessment.
For you to qualify for cashback, all energy-efficient measures will need to be recommended on a valid Energy Performance Certificate (EPC) - which should be given to you when buying a new property, as sellers are obliged to provide you with one - or on a Green Deal Report.
Check out our Green Deal Finance page to find out how to apply.
Green Deal loans
Green Deal loans are repaid through your electricity bill. The way the deal differs from a standard loan is that the repayments you'll make on the loan will (in theory at least) be covered by the energy bill savings you make from having the energy-saving home improvements installed. This system is known as the 'Golden Rule' - you should not pay back more in loan repayments than you are saving on your energy bill.
But the Golden Rule is not a guarantee, just a guideline based on energy-saving estimates. So it's also possible that repayments could be more than your savings while your plan is in place - meaning you would have to find extra cash to fund the difference.
The range of available interest rates varies from provider to provider. However, the Green Deal Finance Company has published a list of example rates, on which the APR ranges from 7.9% to 10.8%. Over a long period, this rate of interest will add a significant amount to the cost of the products you buy. Some providers will also charge a one-off admin fee of £63 and an annual fee of £20 for each loan, whilst others will absorb this cost for you.
You will have to go through a credit checking process in order to obtain a Green Deal loan, and the rates of interest on Green Deal loans are decided by each individual provider. The government has stated that anyone who falls into arrears on their energy bills with a Green Deal loan attached is protected by the obligations on arrears followed by energy suppliers. This means that you must let your Green Deal provider know, and it will offer you advice and help work out a payment plan based on what you can afford.
For more details about Green Deal loans and alternative ways to pay for the Green Deal, visit our Green Deal Finance page.
What Which? thinks of the Green Deal
As with any financial product, whether the Green Deal is a good deal will depend upon your personal and financial circumstances. You may be able to get a lower interest rate through other ways of borrowing. You could use your own savings for energy efficiency measures and make up the difference with government money from the Green Deal Home Improvement Fund - to get this, you don't have to take out Green Deal finance, or even have a Green Deal assessment now.
If you do get a quote for a Green Deal plan, we advise that you read all the terms carefully and consider all the implications before signing up to this long-term financial commitment. Green Deal plans will have different interest rates, charges and conditions, depending on your Green Deal provider, which measures you choose to install, and the term of your plan.
Government is making improvements designed to simplify the Green Deal process. Thanks to Which? campaigning, early repayment fees have now been scrapped. We think more needs to be done to ensure fair terms, such as to reduce the risk that low users of energy might not see any financial savings under the Green Deal. We will continue to press government to make further improvements.
- Read our advice on what to watch out for with the Green Deal
- See what energy-saving measures are covered under the Green Deal
- Save cash by searching for the cheapest gas and electricity