Low-interest loans for heat pumps, USA News (United Kingdom): Details of a new government-backed, low-interest loan scheme to help households pay for heat pumps, solar and batteries have been unveiled. Launched on Tuesday ahead of Chancellor John Healey announcing his first Budget, the scheme is designed to encourage more households to invest in green tech to lower their energy bills. The majority of larger lenders will offer loans in the region of 2 to 4 percent, according to multiple sources, with the scheme covering heat pumps, solar panels and batteries but not insulation. Citizens Advice has warned that limitations within the scheme risk leaving behind a squeezed middle that cannot access support, while rumors circulate that the Government is preparing to cut its Boiler Upgrade Scheme.
How does the new loan scheme work?
The Government is funding participating lenders to help them provide green loans with lower interest rates than deals currently on the market. Previously, there were a limited number of low-interest green upgrade loans available with tight restrictions, such as Nationwide offering zero-percent green upgrade loans for mortgage customers over two or five years. Mainstream personal loans tend to feature higher interest rates, sitting around 5.9 percent APR.
Under the new scheme, the Treasury will pay lenders up to 20 percent of the loan amount, enabling lenders to offer deals with rates several percentage points lower than standard offerings. For instance, if a lender offers solar panel loans at 7 percent, they could drop rates to 2 percent through the government initiative. The loans are available to households across England, Scotland, Wales and Northern Ireland.
What can you fund using the loans?
The loans are available for a minimum of three years and cover specific technologies up to designated caps:
| Technology | Maximum Loan Amount |
|---|---|
| Solar panels | Up to £15,000 |
| Electrical storage battery | Up to £15,000 |
| Air-water source heat pump | Up to £20,000 |
| Air-air source heat pump | Up to £10,000 |
| Ground source heat pump | Up to £35,000 |
| Biomass boiler | Up to £20,000 |
| Heat network connection | Up to £7,500 |
| Micro-renewable system (such as domestic wind turbine) | Up to £20,000 |
The Government stated that installing a heat pump, battery and solar panels could help families save up to £550 annually on energy bills, rising by an additional £300 a year with a time-of-use tariff.
What are the limitations and expert reactions?
The loans will not cover insulation, which is frequently recommended alongside heat pumps for optimal efficiency. James Dyson, a senior researcher at climate change think-tank E3G, noted the loans are helpful for protecting against high gas prices but called it a shame insulation is excluded. Gillian Cooper, director of energy at Citizens Advice, stated the scheme assists households able to borrow but cannot distract from potential cuts within the Warm Homes Plan.
Reports indicate the Government is considering cutting the Boiler Upgrade Scheme, which provides subsidies up to £7,500 for switching from a gas boiler to a heat pump, as the Department for Energy Security and Net Zero looks to trim its budget. However, the announcement noted homeowners can combine a loan with a grant of up to £9,000 through the Boiler Upgrade Scheme and Home Energy Scotland.
Who are the participating lenders?
Participating lenders announced on Tuesday include Homeserve (partnering with E.On), Hometree Finance, Propensio, Secure Trust Bank, Selina Finance, South Manchester Credit Union, Sunsave, Tandem Bank, The Money Co-op and This Bank. Additional lenders and products are expected to join as the scheme develops. Energy Secretary Miatta Fahnbulleh stated that government-supported loans will help families across the UK upgrade homes with no upfront costs.
