Government-backed Warm Homes loans for heat pumps and solar open with 10 lenders
Homeowners anywhere in the UK can now borrow at reduced or zero interest for heat pumps, solar panels and home batteries, applying through a lender rather than the government.
Ten lenders started offering loans under the government's Warm Homes Loan Scheme this week, and a GOV.UK guide explaining how to apply went live at one minute past midnight on Wednesday.
The scheme uses public money to bring down the interest charged on borrowing for low-carbon home upgrades. The Department for Energy Security and Net Zero (DESNZ) says rates are up to 5 percentage points lower than a comparable high street loan, and some of the products on offer are interest free. Repayment terms run to as long as 30 years with some lenders.
The first 10 lenders named by the government are HomeServe Finance, which is working with E.On, Hometree Finance, The Money Co-op, Propensio, Secure Trust Bank, Selina Finance, South Manchester Credit Union, Sunsave Energy, Tandem Bank and This Bank. DESNZ expects more to join later.
Who can borrow
The loans are open in England, Scotland, Wales and Northern Ireland. The applicant has to own the home, with or without a mortgage, and it must be residential. There is no income test set by the scheme, but each lender runs its own credit and affordability checks.
Applications go to a lender directly, through an installer or retailer arranging finance for the job, or through a mortgage provider. Products backed by the scheme are labelled as such. The government does not take applications itself.
Maximum loan by technology
The scheme sets a ceiling on how much can be borrowed for each type of work:
- £35,000 for a ground source heat pump
- £20,000 each for an air to water heat pump, a biomass boiler or a micro-renewable system
- £15,000 each for solar panels or a home battery
- £10,000 for an air to air heat pump, once MCS certification for these is available
- £7,500 for a connection to a heat network
Except for heat network connections, the work must be done by an installer certified under the Microgeneration Certification Scheme (MCS). Fitting the equipment yourself is not allowed.
The figures behind it
DESNZ's worked example is a £10,000 loan at 8% over seven years, which costs about £155 a month on the open market. It says the same borrowing through the scheme could cut repayments by up to £285 a year. It also estimates that a household fitting a heat pump, battery and solar panels could save up to £550 a year on energy, with a further £300 a year possible on a time-of-use tariff.
DESNZ says a Boiler Upgrade Scheme grant of up to £9,000, or Home Energy Scotland funding, can be used alongside a loan to lower the cost of a heat pump, although GOV.UK says government money cannot be used twice to pay for the same improvement. Some homes will be picked at random for an audit after installation, either by DESNZ or by MCS. Complaints about a lender can go to the Financial Ombudsman Service if the firm does not resolve them, and complaints about an installer to MCS.
