The Green Deal explained
But home improvements can also make a huge difference to your fuel bills. It’s common sense, really: a property that is energy efficient retains warmth better warmer so is cheaper to heat. But home improvements cost money.
Even something fairly straightforward such as insulating your loft can set you back about £300, and how many of us have that kind of cash lying around?
So if you are thinking of carrying out some home improvements, you might like to consider the government’s Green Deal. It’s basically a loan so that means you don’t have to fund the work upfront. Instead, you pay back the debt, plus interest, over several years with a charge added to your electricity bill.
You may have heard mention of the Home Improvement Fund alongside the Green Deal. This offered grants towards the cost of energy efficiency measures such as insulation work, but proved so popular that the available funding ran out in mid-2014. Only the Green Deal itself survives.
If you’re interested in the Green Deal, the first step is to arrange for an approved Green Deal assessor to carry out a survey of your home to advise on any energy saving improvements and their potential savings.
It sounds straightforward enough, but there are one or two possible pitfalls. First, the Green Deal assessor might charge – and a typical rate is about £120.
Second, the assessor is not necessarily independent but could be linked to a Green Deal supplier. In other words, you could be letting a salesperson into your home.
The assessor should tell you if he or she is paid commission and should ask permission in advance to recommend any particular products or quote for any improvements. But always ask if you are unsure as it’s important to understand the cost and the status of the assessor at the outset so that you can make an informed decision.
Impact on bills
After the assessment you will receive a Green Deal Advice Report outlining any suggested home improvements and their likely impact on your energy bills. You then take the report to a Green Deal Provider, which will sort out the finance and arrange for the work to be carried out.
Again, you should have your wits about you. Green Deal firms abide by a code of practice, but they are still commercial operations – and a double glazing company is a double glazing company, Green Deal or not.
It’s therefore a good idea to take the report to two or three providers to make sure you get the best deal.
Signing a contract
Once you are happy, you sign a contract, known as the Green Deal plan. The contract will explain how the loan payments will be made, so you should read it carefully before signing on the dotted line. Once the paperwork is sorted, the installer will carry out the agreed work to your home.
Green Deal ‘Golden Rule’
The Green Deal is in many ways similar to a standard loan. You are charged interest on the debt and you pay back the money in instalments over a term of between 10 and 25 years. But there are two important differences.
One: the debt is not personal but attached to the property’s electricity bill. So, if you move house, you don’t take it with you. Instead, the new owners pick up the repayments.
The second difference is the so-called Golden Rule, which means that the loan repayments should never be more than the savings achieved. In other words, your energy bills should be roughly the same before and after the home improvements.
Winners and losers
However, the Golden Rule is not a cast-iron guarantee as the figures are based on average energy consumption. If you use more energy than the typical household you could be a winner under the Green Deal. But if your energy consumption is less than average, you could lose out.
Let’s assume you install loft insulation with a predicted energy saving of £200 a year. The finance deal costs £190 a year, so the average household would be quids in. A household with high energy consumption would also gain under the deal. For instance, if the insulation cut your bill by £250 a year, you would save more than the cost of the loan.
But if your energy consumption is low, the insulation might not make much difference to your heating costs, so you could end up paying more for the Green Deal than you save on your energy bills.
The Green Deal can be a good idea for some households. But remember it is a loan and not a grant. You will therefore always be better off if you can pay for the home improvements up front, or perhaps with a 0% credit card. You would then pocket all the energy savings, without worrying about interest payments.