Green Deal Is a Good Deal on Mid-Size Loans

18 September 2013

Mid-size loans provided under the Green Deal offer householders value for money and competitive interest rates, according to market research consultancy firm, Capital Economics.

A report from the company found that householders looking to borrow between £1,500 and £5,000 to make energy efficient home improvements would best be served by a Green Deal loan, which offers lower interest rates than other money lenders.

The Green Deal, a Government initiative launched on 28 January, allows householders to make any of 45 home improvements without paying for upfront costs. The scheme, which is designed to lower Britain’s carbon emissions while improving the energy efficiency of its housing stock, provides a loan repayable up to 20 years which is paid back via a property’s electricity bill. Under the scheme’s ‘golden rule’, the cost of repayment with interest should not exceed the sum of savings made by making the improvements in the first place.

Measures included under the Green Deal framework include: Cavity Wall Insulation, Loft Insulation, Solid Wall Insulation, boiler replacement, double glazing, microgeneration (including solar panels), and many more.

The scheme was hindered by technical problems to begin with and has been criticised for a slow uptake. As of 31 August, 71,210 Green Deal assessments – which are required before any financial agreement can be put into place – had been completed but only 677 plans had been put in place. Furthermore, only 12 of these plans were considered ‘live’, meaning the work had been carried out and a repayment structure was in place.

However, the Government recently reported that 81% of those surveyed had already installed, or planned to install, at least one measure following an assessment, with the majority opting for alternative financing, such as savings, secured loans, and general income.

However, the Green Deal Finance Company (GDFC) – overseers of the entire scheme – and Capital Economics have declared the scheme a less expensive way of making these changes.

"We have a great opportunity to help people protect themselves against rising energy bills in the years ahead with our £244m funding package,” explains Mark Bayley, Chief Executive of the GDFC.

“Many people will be surprised by how much energy they could save in their home, it makes sense for people to take a second look at Green Deal payment plans. Our rates are fixed and competitive, especially for those looking for long term unsecured finance to improve home energy efficiency across a range of loan sizes.

“For unsecured sums of £5,000, Green Deal payment plans offer the lowest cost option.”

Those households looking to take out a loan of £1,500 – to cover the cost of Loft Insulation and Cavity Wall Insulation for example – over a period of 10 years should expect to pay interest at a fixed rate of 10.3%, or 9.6% for 20 years. Those looking to borrow £5,000 over 10 years would pay 8.2% or 7.9% for 20 years. Because these rates are fixed, they represent a lower cost than bank loans and credit cards that are impacted by interest rates.

“Taking into account market expectations of base rate rises,” explains Bayley, “fixed rate Green Deal finance is even more competitive for most people, even against the best credit card and mortgage-related products".

< Back to News

read more
Enter your postcode, products and circumstances into our form to see which grant you are likely to qualify for.
Enter your contact details so we can arrange a free, no-obligation survey by an approved installer.
Our approved installer in your local area will call you to arrange your free no-obligation survey.
Privacy & Cookies | Terms - Copyright EnergyLink Ltd. 2013