Beyond affordability: why heat pumps feel like a gamble

We are grateful to the European Climate Foundation for their support in conducting this research.

Introduction

Heat pumps will have an important role in the UK’s transition from a fossil fuel energy system to electrification. The number of heat pumps in the UK is still relatively small, however homeowners are increasingly open to the idea of installing one. Interest is also likely to continue to increase as homeowners look for ways to manage volatile energy bills, find more environmentally friendly ways to heat their home, and benefit from government grants and other support.

With heat pumps costing more to install than a gas or oil boiler, surveys have often shown that the upfront cost of installing a heat pump is the main barrier for most households. This will be an issue for many households and particularly households that are not eligible for a 100% grant from the government, but who don’t have savings and are unable to afford any additional outgoings. However households who could afford to make the switch are also choosing not to, suggesting other factors are also influencing decision making. While previous assumptions heavily weighted the upfront financial cost as the primary roadblock, this new research shows that the problem runs deeper. It is not simply a question of affordability, but of willingness to pay. 

This willingness is being affected by a combination of factors, reflecting the fact that changing a heating system is a big decision for homeowners. Not only does it involve high upfront costs and disruption, but the choice can also have a major impact on their future energy bills and the warmth, comfort and saleability of their home. Heat pumps are also an unfamiliar technology for most homeowners, so they lack the reassurance of knowing it is a ‘tried and tested’ technology. However on top of this homeowners experience a recurrent sense of risk and uncertainty in relation to important aspects of the decision making process  that makes it feel like a high stakes gamble. Together, these factors are preventing homeowners that could otherwise afford to purchase a heat pump from installing one. 

The following is a summary of the new evidence that we have uncovered that is undermining homeowners’ confidence and dissuading them against getting a heat pump:

1. The heat pump “high stakes gamble”

Previous work in this sector has largely focused on financial decision making, treating upfront cost as the ultimate barrier. However, this research demonstrates that even householders with the financial means - through higher incomes or savings - are actively choosing not to get a heat pump. 

Homeowners do not view heat pumps as a standard home upgrade (like a new kitchen or a bathroom) because the technology currently lacks a clear “emotional payoff” or immediate tangible gratification. Instead, consumers approach heat pumps as an open-ended risk-management decision. They weigh the concrete upfront costs against uncertainty about the quality of the installation, ambiguous ongoing running costs, and fears about performance. Because the long-term returns are not clear or guaranteed, the investment feels less like a sensible improvement and more like a “high-stakes gamble”. Until the industry can address the uncertainties, the willingness to pay will remain suppressed.  

2. Uncovering the psychology nuances through qualitative research

Much of the existing evidence base has been survey-focused, which effectively identified affordability as a major issue but failed to capture why consumers with the right homes and adequate budgets were still getting stuck in the decision-making funnel. By utilising qualitative methods, specifically in-depth interviews and focus groups, this research uncovered the deeper psychology nuances governing homeowners behaviour. 

This approach revealed that the decision to not get a heat pump is heavily influenced by behavioural biases such as present bias and loss aversion. Most homeowners are currently living with a heating system that is ‘tried and tested’ and whilst they may be worried by recent energy price rises and the impact that oil and gas has on the environment, taking a step into the unknown feels like a high risk. The qualitative findings make it clear that simply introducing new financial loans or models that spread out the cost will not be enough; the psychological barriers of perceived risk and lack of control must be addressed first and foremost. 

3. The property tenure and value mismatch

A critical new finding from this research centres on housing tenure and the fear of property devaluation. Because the financial payback period for a heat pump is long, homeowners suffer from a “tenure mismatch”. Many are unsure they will live in the property for long enough to ever see a return on their investment and make it feel worthwhile. 

Consequently, a heat pump is frequently viewed as a financial liability rather than a value-adding asset. Homeowners were deeply concerned about how prospective buyers might view both the technology and any financial arrangements attached to it. For some, the concern was not the heat pump itself, but the prospect of transferring a Property-Linked Finance (PLF), which some homeowners actively rejected as a “debt burden” being passed on to the next owner.  

Together, these concerns point to homeowners not currently seeing heat pumps or associated financing arrangements as adding value at the point of sale. Instead, they are often viewed as a complicated risk with potential financial disadvantage. To overcome this, the presence of a heat pump must be repositioned in the property market so that these homes are viewed as premium, “ready-to-run” assets. 

4. The psychological barriers of service-based models

To address the high upfront costs, the industry is exploring service-based models such as Heat-as-a-Service (HaaS) and Third Party Ownership (TPO). While these models theoretically remove the barriers of upfront cost and maintenance risks, they introduce several new psychological uncertainties regarding home ownership. 

Rather than reassuring homeowners, these models trigger deep emotional resistance. Homeowners view heating and hot water as a basic, intrinsic human right necessary for survival; the idea of handing control of this over to a third-party provider via a “heating cap” feels restrictive. Furthermore, signing 10 to 15 year lease agreements raises anxieties about being trapped in restrictive contracts, facing arbitrary price hikes, and falling victim to scams or profiteering middlemen. Homeowners ultimately want control, and they interpret these service models as a loss of control over their own homes.

5. The invisible reassurance: the Microgeneration Certification Scheme (MCS)

A major driver of consumer anxiety is the perception that the heat pump installation market is a “Wild West” with inconsistent advice and “cowboy” builders. To mitigate this risk, homeowners want a recognised, rigorous standard of authority, frequently citing the Gas Safe register or CORGI as the benchmark for trust. 

The MCS seeks to provide the guarantee of quality and installer competence that homeowners are looking for. However, it is currently an invisible solution. Homeowners have almost no spontaneous awareness of the MCS acronym, rendering it entirely meaningless to them. For MCS to serve as a genuine tool for confidence, the industry must improve the MCS’s visibility and communicate its standards in plain, accessible language that directly addresses homeowners fears.

Our recommendations

To some extent, the uncertainty experienced by homeowners reflects the complexity of the decision making process itself. There are multiple issues for homeowners to consider, some of which are dependent on the type of property, how the household will use the heat pump in practice, and the wider unpredictability of energy prices. However, it is clear from homeowners’ experiences that the sector has failed to provide the clarity and reassurance they need to move forward. 

The Warm Homes Plan has set out the government’s strategy for supporting households to make the transition to warmer, more affordable, low carbon homes. The plan included a new focus on the use of solar panels and batteries to reduce energy bills, a commitment to enhance consumer protections and a financial offer for all households regardless of tenure or income. 

We have identified four areas where the government needs to do more to build confidence, reassurance, and support well informed consumer choices.  The government should aim to equip homeowners with a range of credible options which they feel safe choosing between, depending on their needs and circumstances. Importantly, there is no single heating or financing solution that works for all homeowners. In some areas, the government has already identified or started to address the issues we have highlighted, but it needs to make faster progress and address the specific needs of homeowners so they have the confidence and reassurance they need.  

Long term confidence on running costs.

• Reduce the price of electricity: Heat pumps are significantly more efficient than gas or oil boilers, but the price of electricity is inflated by environmental and social levies with the result that a heat pump can be more expensive to run compared to a gas or oil boiler. The government should remove environmental and social levies from the price of electricity and fund them through general taxation. This will provide some benefit to all households, and provide most benefit to households on direct electric heating that are disproportionately living in fuel poverty. It will also support the transition to more efficient electrified heating options such as heat pumps. 
• Incentivise the use of performance monitoring: More efficient heat pumps cost less to run. Efficiency is influenced by a number of factors related to the size and insulation of the property, but the design of the heating system plays a critical role. The government should incentivise the use of heat pump and insulation performance monitoring technology with the aim of making it widespread when effective schemes are in place and the supply chain is sufficiently established. This will incentivise installers to install efficient systems, and enable homeowners to hold installers to account if a system doesn’t reach the efficiency that was promised. 
• Support homeowners to access appropriate tariffs: A third step to reducing energy costs is for homeowners to use a smart tariff that offers them lower rates for the energy they use. With a variety of smart tariffs available (including time of use tariffs), homeowners need support to assess which is most suitable to their needs. The government should work with businesses to make it easier for homeowners to get the advice they need to find the best tariff (including smart tariffs) and set up their heat pump and any other low carbon -technology they have to work with that tariff. This includes raising awareness of the tariffs available and providing accessible means of comparison. Some homeowners may also need the reassurance of risk free trial periods with Time of Use tariffs with mechanisms to prevent them accidentally incurring much higher bills.

Assurance around the quality of the installation

• Introduce a Warm Homes Guarantee: Our research shows that a government backed certification scheme can provide homeowners with more reassurance around the quality of heat pump installations, but they are largely unaware of MCS. The government should introduce a more straightforward Warm Homes Guarantee covering the quality of heat pump installations and other energy efficiency measures. This should include a commitment that any problems will be put right quickly and without hassle. The guarantee must be supported by more detailed requirements as currently set out in government backed certification schemes such as MCS. The guarantee should apply to any energy efficiency measure funded or backed by government financing, and a date should be set for when it will be applied to all measures. The government has committed to a consultation on consumer protection in the summer, this will be an opportunity to simplify and strengthen the current system to ensure a more straightforward and effective system.

Financial products that meet homeowners’ needs

• Deliver promised zero or low interest loans: Even with a grant from the government Boiler Upgrade Scheme (BUS), the initial cost of installing a heat pump can be expensive. Additional measures such as pairing a heat pump with solar panels or a battery will help to reduce future energy bills, but also increase the upfront cost. The government should meet its commitment to make zero or low interest loans available through commercial lenders. Many homeowners had a preference for the relative simplicity and control that a short-term loan or a mortgage extension offers and this should be the priority for the government.
• Address homeowners' questions and concerns about new financial products. New financial products such as Property Linked Finance and Third Party Ownership agreements seek to address consumer needs when considering a heat pump, but for many homeowners they leave too many questions unanswered. These are often related to different scenarios that could occur over the course of a very long term agreement. The government and industry should resolve these issues and ensure that any gaps in consumer protection are addressed before making third party agreements eligible for Boiler Upgrade Scheme funding.
• Ensure new financial products do not frustrate homeowners selling their home. Homeowners have specific concerns about the impact that owning a heat pump may have on selling their property. Some relate to the desirability of the heat pump itself and will need to be addressed through the confidence and reassurance measures above. Others were more directly related to the home selling process. The government should work with relevant businesses to ensure that new financial products such as third party agreements and property linked finance do not become a barrier to accessing a mortgage or add unreasonable friction or costs to selling a home.

Consistent reliable information and advice:

• Provide core information services: Changing a heating system is a complex decision and homeowners need information they can trust. However currently many homeowners struggle to know where to go for information and are often frustrated by the information they receive. The government should provide core information for homeowners that look to the government for information and advice. This will also give businesses the information that they can use with confidence. 
• Support partnerships to reach more homeowners with good quality information and advice: Many homeowners go to businesses, local authorities or consumer groups for information and advice on installing a heat pump, but are confused by the lack of consistency. Government and businesses should work together to provide consistent information and signpost to reliable sources of information and advice where they are not providing it themselves. There is still a gap in the market that needs to be filled for services that provide advice tailored to the needs of a specific household and property.