UK homes get low-interest loans for solar panels and heat pumps

A new government-backed scheme launched Tuesday will offer UK households loans with low or zero interest to install energy-saving technology such as solar panels, heat pumps and batteries. The Warm Home Loans initiative aims to cut energy bills by hundreds of pounds a year without requiring any upfront payment. Loans will range from £7,500 to £35,000. Air-source heat pumps can be financed up to £10,000, while ground-source systems are eligible for up to £35,000. Energy suppliers British Gas and E.On have teamed up with lenders Tandem Bank and Homeserve respectively to provide the credit directly to customers at rates below those on the high street.

Savings and partnerships

According to the government, households that combine a heat pump with a battery and solar panels could save up to £550 annually on energy bills. That figure could rise by a further £300 a year if customers use a time-of-use tariff. A trial by E.On found that fuel-poor customers in Coventry saved more than £250 a year on average by pairing a home battery with such a tariff.

Chris Norbury, chief executive of E.On UK, said the scheme was “an opportunity to take that further” by “removing barriers to low-carbon technologies”. Energy secretary Miatta Fahnbulleh said: “Energy is an everyday essential that must be affordable for everyone. These government-supported loans will help families across the UK upgrade their homes with no upfront costs to make them warmer and cheaper to run.”

The launch comes a day before chancellor John Healey delivers his first budget. Reports suggest the budget will scale back heat pump grants through the boiler upgrade scheme, though it won’t be scrapped entirely. Treasury officials view the boiler upgrade scheme as a subsidy used mainly by middle-class households. But grants of up to £9,000 a year are likely to remain for homes not connected to the gas grid, which rely on high-cost heating oil. Those grants could be combined with the new low-interest loans to cover the full cost of a heat pump.

Other lenders participating in the scheme include HTG Finance, Propensio, Secure Trust Bank, Selina Finance, South Manchester Credit Union, Sunsave, The Money Co-op and This Bank. The government believes the initiative will allow “thousands more households” to cut bills and spread repayments over many years. Soaring energy costs drove record demand for low-carbon home energy upgrades over the past year.