The Green Deal

The original Green Deal scheme closed in 2015, but you can still get loans for energy-saving home improvements through the Green Deal Finance Company. Find out whether a Green Deal loan is right for your home, about changes to the scheme and how they affect existing Green Deal loans, plus how else you can pay for home improvements.

The Green Deal was a government scheme that provided loans to households to finance energy-efficient home improvements. The loan was designed to be paid back through the savings made on energy bills.

The original scheme ran from 2013 to July 2015, when the government stopped supporting the Green Deal Finance Company. Some private companies continued offering Green Deal loans, however.

In 2017, the Green Deal Finance Company began offering loans for selected energy efficient home improvements again, backed by private investors.

Read on to find out more about the current scheme. If you already have a Green Deal loan, find out if you can pay it back early and if Green Deal home improvements are under warranty. Plus, what to do if you're selling your home and have a Green Deal, and how to switch energy supplier.

Before you consider a loan to make your home more energy efficient, try these simple and cheap things to save money and energy at home. Start with a water-saving shower head or keep track of your heating with a smart thermostat.

Green Deal home improvements

Green Deal loans are a way for homeowners to fund energy efficiency measures in their home and pay them back through their energy bills.

Loans are currently available for the following home energy improvements:

• new or replacement boilers (condensing and biomass)
• insulation (solid wall, cavity wall, loft and floor)
• heating, hot water and lighting controls
• heating system insulation
• ground and air-source heat pumps
• fan-assisted storage heaters
• flue gas recovery
• draught proofing
• innovative hot water systems.

How does the new Green Deal differ from the old Green Deal?

The original Green Deal scheme was government-funded. Now the Green Deal Finance Company (GDFC) is backed by private investors.

The Green Deal Finance Company said that the main changes compared with the previous scheme are:

• a ‘better and faster’ customer journey
• an improved website
• offering ‘top-up financing’ to customers where the Green Deal won’t cover the full costs
• taking a ‘much more proactive stance on vetting Green Deal Providers’
• ensuring they go through ‘regular and stringent training’
• monitoring providers to make sure they comply with Green Deal Finance Company standards.

Green Deal loans

The aim of the original Green Deal loan from the Green Deal Finance Company was to help spread payments for the upfront cost of energy efficiency measures, such as solid wall insulation, boilers and double glazing.

Green Deal loans work differently to a loan from a bank or other credit provider:

• You repay the Green Deal loan through your electricity bill payments.
• The golden rule of the Green Deal is that loan repayments should never exceed the savings you made on your energy bills.
• However, this golden rule is not a guarantee that your bill savings matched your loan repayments. It's based on estimates of a typical household's energy usage and savings, and doesn't take into account energy price rises.
• The loan is attached to the property you live in, not you. If you sell your home, it passes to the new owner.
• 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.
• The Green Deal Finance Company loans had interest rates ranging from 7.9% APR to 10.3% APR and lasted between 10 and 25 years.

The National Audit Office conducted an independent audit of the Green Deal scheme. Its findings were published in April 2016 and found that, during its lifespan, the Green Deal loan scheme only funded 1% of energy efficient measures installed through the Energy Company Obligation (ECO) and Green Loans scheme combined. It also found that the scheme saved only negligible amounts of CO2 and that households did not see these loans as an attractive proposition.

If you want a Green Deal loan now, you need to find a registered Green Deal provider – search on the government's Gov.uk website. Before you sign up to a loan, make sure you carefully research interest rates, as well as the terms and conditions of the loan, to make sure they suit your needs. This scheme isn't available in Northern Ireland.

However, there are other ways you can finance home improvements if you'd rather not get a Green Deal loan.

Alternatives to the Green Deal

If you're looking for financial support to make energy efficiency improvements to your home, a scheme called the Energy Company Obligation (ECO) provides support to low-income and vulnerable households for energy efficiency home improvements.

There are other ways to pay for improvements to your home and make it more energy efficient:

• Use your savings: you benefit from energy savings straight away as there are no repayments. Paying this way, however, may restrict you to cheaper home improvements.
• Use an unsecured loan: you may get a better interest rate than with one of the old Green Deal loans. But the loan is attached to you, not your property, and likely to be shorter-term with higher repayments.
• Increase your mortgage: you may be able to get a better interest rate. However, there are no guarantees that the costs will be met by an equivalent increase in the value of your property.
• Use a credit card: you can take advantage of 0% interest deals and then transfer your balance over to a different credit card once the deal has expired, plus your installations will be covered by Section 75 of the Consumer Credit Act. Bear in mind that if you don't pay off your balance in full or transfer in time, interest rates can be steep.

Start saving money on your energy bills now with our guide on 10 ways to save money on your energy bill.

If you have an existing loan from the Green Deal Finance Company 

Paying off a Green Deal early

As a result of Which? campaigning, the Green Deal Finance Company announced it was removing any early-repayment fees for loans issued after May 2014.

If you took out a Green Deal loan before this date, you can still pay it off early but may incur a fee. If you took out a Green Deal loan for less than £8,000 over 15 years or less, 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 more than £8,000 (up to a max of 1% of the loan). But for a Green Deal 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.

Are Green Deal measures protected by warranties?

Most Green Deal measures came with a minimum five-year warranty and an extended 10-year guarantee to cover any building damage sustained as a result of the measures being installed. For solid-wall insulation and cavity-wall insulation, Green Deal providers must have guarantees for both the improvements and consequential building damage for 25 years.

Should you have a problem with a product after the warranty has expired, you will still be paying for a non-functioning product and will have no protection.

If you sell your home

The existence of the Green Deal must be disclosed to the buyer. If the buyer of your home does not feel comfortable taking over the Green Deal loan, they might want to renegotiate the terms of sale or you could consider repaying the Green Deal off early as part of your conveyance. However, we haven't yet come across any cases of buyers being put off.

If you have just moved into a house with a Green Deal attached to it, the person who pays the electricity bill pays the money back. So if you’re a tenant in a rented property, you’ll be paying back the costs – not the landlord. This is because the tenant can expect to benefit from lower energy costs. 

If you move into a property with a Green Deal, the landlord or seller must show you a copy of the Energy Performance Certificate – this will explain what improvements have been made and how much you’ll need to repay.

Switching

In most cases you can still switch energy suppliers if you have taken out a Green Deal, as all of the big providers (British Gas, EDF, Eon, Npower, Scottish Power and SSE) were part of the scheme. There are a handful of small energy suppliers that you can't switch to if you have a Green Deal, so check before switching. 

If you're thinking of switching, find out which are the best and worst energy companies.