Will the green energy deal cut your heating bill?
Homeowners who sign up for energy-efficient improvements to their home through the new energy savings scheme, Green Deal, can benefit from a warmer home with little or no upfront cost. But they need to do their homework before agreeing to contracts that could tie them into high interest charges and make their homes more difficult to sell.
The government claims Green Deal will enable people to transform their homes.
Launching the scheme, energy and climate change secretary Edward Davey said: "more and more families are being hit by the rising cost of fuel bills, and the best way people can protect themselves from increased costs is to use less energy. This is where the Green Deal comes in, giving people a whole new way to pay for energy-saving home improvements.
"The Green deal is a great deal. Improve the look and feel of your home, make it cosier and at the same time save energy - what's not to like?"
Plenty, according to critics of the scheme, who warn that homeowners could end up paying more than they need to by using Green Deal contractors and loans, and could face penalties if they decide to pay off the loan early.
How it works
Under the Green Deal, homeowners can borrow money for energy-efficient improvements, which is repaid through their electricity bill for up to 25 years. The key attraction is that repayments will be funded in part or entirely from the savings made on their energy bills. Forty-five types of improvement are available, ranging from insulation to renewable energy technology.
To benefit from the scheme, you must first contact a Green Deal assessor or provider to assess the energy efficiency of your home.
Type in your postcode at greendealorb.co.uk to find assessors and providers in your area. The assessor recommends improvements and indicates whether they will pay for themselves through reduced energy bills.
Green Deal providers will then quote for the improvements: you can get as many quotes as you like, and you don't have to accept all the assessor's recommendations.
Once you have chosen a provider, it will write up a contract setting out the work that will be done and the repayments, including a fixed interest rate. Once this is signed, the provider arranges for an installer to begin work.
Early adopters of the Green Deal scheme - including owner-occupiers, private and social tenants and landlords - could benefit from cashback via a voucher scheme. The amount of cashback on offer ranges from £10 for hot water cylinder insulation to £650 for solid wall insulation and £20 per square metre for replacing old, single-glazed windows with double or triple glazing.
For a full list of the rates available, visit gdcashback.decc.gov.uk.
However, these rates are only guaranteed until the first £40 million of funding has been claimed, and the government has already indicated the cashback levels are likely to drop as the scheme progresses.
Consumer bodies have also expressed concern about the terms and conditions of the Green Deal loans. The government has not set a cap on the interest rate that providers can charge, although the Green Deal ‘golden rule' stipulates that if a loan costs more than the savings each month, it will not be allowed to proceed.
So far, interest rates range from 6.96% to nearly 11% - significantly higher than the rate you would pay if you extended your mortgage, took out a personal loan or borrowed through a low or interest- free credit-card deal. Homeowners may do better to ask what their mortgage lender can offer.
Nationwide Building Society, for example, is offering to chop 0.5% off the cost of its two-year fixed and tracker further advance rates if the money is used for energy-efficient home improvements, so borrowers could pay as little as 2.29%.
Consumer watchdog Which? is also concerned that anyone wanting to pay off a Green Deal loan early may face hefty penalties. Under Green Deal's rules;, providers can claim for any interest that would have been paid by the homeowner should the deal have run its course.
It says: "The government has changed existing rules to allow Green Deal lenders to charge fees to let customers repay their loans early. We don't think you should be charged a large fee for paying back a loan early.
"For most loans, the Consumer Credit Act limits the amount of compensation you have to pay to 1% of the total loan. However, if you have a Green Deal loan that lasts for more than 15 years and want to pay it off early, your provider is entitled to charge a large fee."
What happens When you sell up
Green Deal loans are attached to the property that has benefited from the energy- efficient improvements, rather than the householder who has signed up to the deal.
This means that the person living in the house and benefiting from lower energy bills is the one who pays for the improvements. Some have expressed concern that homeowners who try to sell their properties before these loans are paid off could struggle to persuade buyers to take over the loan repayments.
But Ed Mead, director of London estate agent Douglas and Gordon, believes that buyers will like the idea that work has been done by approved providers to improve the property.
He says: "The loans aren't particularly big, so I don't think they will be regarded as a negative. Also, if you are considering two similar homes, but one has had sufficient Green Deal work done to raise its Energy Performance Certificate (EPC) rating to a C, while the other is a D or E, I think you will choose the one that is rated C because it is warmer and cheaper to run."
Homeowners with ongoing Green Deal loans must reveal the details in their EPC, including a banner on the front page stating that the property has a Green Deal and an additional page containing details of the improvements made and what repayments are due and over what period.
Everything you own: all your assets (property, cars, investments, savings, insurance payouts, artwork, furniture etc) minus any liabilities (debts, current bills, payments still owed on assets like cars and houses, credit card balances and other outstanding loans). When you’re alive this is called your wealth; when you’re dead, it becomes your estate.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.