Green Deal home improvements interest rates revealed

The Government’s flagship energy programme is just months from its autumn launch and finally the Green Deal home improvements rates have been announced.

The scheme, which will help the UK insulate their homes with products such as double glazing and replacement boilers, hasn’t been cast in the best of lights recently. A recent survey showed 80% of homeowners would pass up the scheme and interest rates won’t attract many of those who have already distanced themselves.

The Coalition, backed by MPs, have revealed that the average interest rates attached to the Green Deal home improvements scheme will be 7.5%. And consumer watchdog Which? is concerned that this means the scheme will not deliver its aim of improving the UK’s energy efficiency.

How will the scheme work?

Energy efficiency has been one of the Coalition’s primary aims and the Green Deal was intended to expand on these targets, encouraging homeowners to invest in insulation. Not only would this reduce carbon emissions, but also lower consumer energy bills.

Under the Green Deal home improvements scheme:

  • Homeowners will be able to apply for loans up to £10,000 for insulation to add to their properties. This can be double glazing, a replacement boiler, loft lagging or wall cavity insulation
  • The Government loans would then be paid back monthly with the money saved on energy bills. Double glazing and replacement boilers can save up to £300 a year each on your bills
  • The Green Deal home improvements loan will be attached to the property and not the homeowner. So if you choose to move on later down the line you won’t have the loan wrapped around your neck
  • But this could have a damaging effect on your ability to sell the property, with prospective buyers unwilling to take on the loan
  • And given that payback rates will be worked out on a national average, you could be forced to pay off more monthly than you’re actually saving

Talking about the revealed interest rates, Richard Lloyd, the executive director of Which? said: “Our recent consumer research, and, in our view, the Department of Energy and Climate Change’s own consumer research, suggest that it will be a challenge to make the Green Deal a compelling proposition for consumers.

“An interest rate of 7.5% could prove to be an major additional barrier to uptake of the scheme.”

But a Department of Energy and Climate Change (DECC) spokesperson backed up the high interest rates, saying: “This compares very well for those on the lowest incomes that often have poor credit ratings and can often only access loans at high, punitive rates.”

For homeowners with a good credit score, lower rates will be available and a £10,000 loan could see you with 6%.

If you’re interested in a replacement boiler for your home, it’s best to avoid the Green Deal home improvements scheme and invest this summer when prices are at their lowest. Leaving an installation until the winter will see you pay a higher price, meaning return of investment will be cut.

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