Green Deal relaunches with home improvement loans paid for through energy bills
- The Green Deal Finance Company soft launches a new loan scheme
- It will focus on boilers first then insulation and renewable energy measures
- The GDFC was previously Government-funded but closed in 2015
- Loans are paid back through a home’s energy bills over a set time period
Loans for energy efficient measures such as insulation, boilers and ground source heat pumps are available once again through the Green Deal Finance Company (GDFC).
Households wanting to cut their energy bills can apply for home improvements and pay for them through their energy bills.
The Green Deal loans were originally offered by the Government but the previous scheme shut in 2015 due to low take-up levels.
It has now reopened with funding from private investors and households can apply for loans from a select number of providers.
The idea behind the scheme is to help people make their homes more energy-efficient and to cut their energy bills.
Homeowners can take out loans to pay for energy efficient measures which are then paid back through their energy bills over a set period of time.
Here we look at exactly what’s changed, why the original deal was pulled and how you can benefit from the new loans.
What is the Green Deal?
The Green Deal was a Government scheme set up in 2013 that allowed consumers to apply for loans to have energy efficient measures installed in their homes and were paid back through their energy bills.
There were 45 measures to choose from and the funding was administered by the GDFC.
It was shut two years ago but has recently relaunched.
Under the new scheme, which is currently being soft launched, there are six green deal providers (GDPs) offering the loans and installation and this number is set to increase by the full launch at the end of September.
The initial focus of these loans will be for boilers, but they will also be available for insulation, ground source heat pumps and air source heat pumps. The GDFC says eventually these providers will be offering all of the 45 measures allowed under the previous scheme.
What has changed now it has been relaunched?
Full details about how the new scheme will work haven’t been released yet but it’s expected to work in a similar way to the previous one.
The GDFC says the main changes will be around the way people apply for loans and there will be changes to the technology platform used and customer journey.
The loans process will be also be streamlined, there will be a more proactive stance on vetting GDPs and the entire company will be rebranded and renamed.
How will the loans work?
The benefit of taking out one of these loans is that you won’t have to stump up any money upfront because the loans are repaid through your electricity bills.
The loans on offer are designed to last as long as the estimated life of the energy efficient measure installed, up to a maximum of 25 years.
For example, if you took out a loan for £3,000 for a new boiler and the boiler had a 12-year term, the loan repayments would be calculated at £250 a year, or £20.80 a month, plus interest of 9.5 per cent on the decreasing loan.
However, the GDFC says these loans are designed to be ‘cost neutral’ as the theory is the energy efficient measures lower a household’s yearly bills, and the repayment comes from the savings made on energy costs.
While the payments are low, there is still a relatively high rate of interest applied to the loan and the longer the term, the more interest you will end up paying. However, it is possible to pay it back sooner without penalty and there are no late payments fees either.
The GDFC says that when compared to traditional unsecured consumer credit, these loans will have a higher acceptance rate because the overall default rates will be low. It also says it’s an attractive offer as the loan is part of package which includes installation, so homeowners don’t have the hassle of sourcing finance and then arranging installation.
If the loan is attached to my house, will this make it harder to sell?
Under the previous scheme, there were fears having one of these loans would make it harder to sell your home.
This is because the Green Deal loans are attached to properties and therefore repayments are made by those living in the home, through their energy bills.
However the GDFC says that instead, having one will add value to a home as it increases the property’s energy efficiency rating and makes it warmer throughout the winter.
Who is funding the new Green Deal?
The GDFC was acquired in January this year by three investors: Greenstone Finance, Aurium Capital Markets and Honeycomb Investment Trust.
GDFC Services, which is part of The Green Deal Finance Company Group, launched a three-year bond offering a return of 12 per cent per year last month.
It is hoping to raise £5million for the new Green Deal scheme and people can invest as little as a fiver through ethical peer-to-peer investment platform Abundance.
Kilian Pender, CEO of the GDFC said: ‘We are extremely pleased to announce the relaunch of the Green Deal scheme and Green Deal loans.
‘Since acquiring the business in January, we have received a significant amount of support from government, energy efficient focused organisations, manufacturers and installer organisations amongst others, all of whom are eager to see the scheme continue where it left off and build further momentum.’
How can you apply for Green Deal loans?
Anyone interested in registering for the scheme can do so on the GDFC website where they will be matched up with a local Green Deal Provider.