The Green Deal is a government scheme due to launch at the end of January, aimed at making energy efficient home improvements affordable for everyone. The basic premise is simple – the scheme provides loans for a wide range of improvements including solar PV and insulation, and the homeowner pays the loan back using the bill savings the improvement generates. An assessment is done beforehand to ensure that the savings at least equal the payments, but preferably with the homeowner making a saving. There are some circumstances in which the Green Deal model doesn’t work by itself – for example, if a household can’t afford to heat their home adequately in the first place, in which case a Green Deal would merely make the heating more affordable rather than actually delivering savings. These homes can benefit from help under the Energy Company Obligation, a complementary scheme paid for by the energy companies. The ECO also helps homes in need of improvements that are too expensive to be worthwhile otherwise, such as solid wall insulation.
So, the Green Deal won’t make householders poorer, but is it a good deal for you? The answer depends on two questions:
Can you afford to pay for the improvement yourself or do you have another lending scheme available to you?
The loan repayments for the Green Deal include interest at around 7%, which is likely to continue for the first two years of the scheme, though the Green Deal Cashback Scheme is currently providing cash incentives to early adopters which will offset this somewhat. Other borrowing methods like remortgaging your house may only attract a rate of 4%, so it may be worth getting the Green Deal assessment done to determine what improvement’s best for you, and then funding it outside of the Green Deal.
How long are you planning on staying in your house for?
If you fund your improvement outside of the Green Deal finance scheme you may want to be sure you’re staying in your property for the time it takes the improvement to pay for itself. If you move before the payback time is over, you may well end up losing money as there’s little certainty about how much a low carbon improvement adds to a property’s value. You may deem losing the money worth it, however, if you value having a more efficient house in the meantime. If you’re likely to move early, Green Deal finance may be a better option as the loan is attached to the house rather than you, meaning that you don’t lose money if you decide to move.
The Green Deal has the potential to deliver savings and energy efficiency to many households – whether you should get a Green Deal loan or fund the measures yourself really does depend on your circumstances. Why not complete our free assessment now to tell you which improvements would be a worthwhile investment in your house?