Today marks the date that finance packages come into play that will enable work to start on accredited Green Deal schemes.
The Green Deal means home owners and tenants (with their landlord’s agreement) can make their properties more energy efficient without paying up-front. The repayments come off the electricity bill. The so-called ‘Golden Rule’ of the scheme is that the loan repayments made by the property owner must be less than, or equal to, the savings on their energy bill. There are 45 different home improvements for installation available under the deal. These range from loft and cavity wall insulation to draught-proofing, secondary glazing and heating controls.
In an uninsulated home a quarter of heat is lost through the roof according to The Energy Saving Trust. As loft insulation is effective for at least 40 years, it should be the first thing that people address to become more energy efficient.
So how does the scheme work?
The first step is to request a home visit from a Green Deal assessor, who will identify any improvements that are suitable and would pay for themselves. Some assessors may charge for the assessment. Homeowners/tenants can then go to as many providers as they like for quotes. The Green Deal assessor is likely to quote, but as with most things, it is likely to pay to shop around. To find approved assessors and providers visit www.greendealorb.co.uk/consumersearch The Energy Saving Trust can also help in England, Wales and Scotland (the Green Deal only applies to these three parts of the UK for now).
The question that worries everyone is ‘will the savings made be greater than the cost of the work?’ The scheme works like this: Green Deal repayments must be pre-agreed, based on the assessor’s estimate of your future cost savings. So the actual savings will depend on how much energy you use and how fuel prices change. The property owner/tenant can do a lot to control the former, especially if they use a smart meter with an energy monitor. However, there is nothing they can do about the latter. Therefore, there is a risk that repayments will end up costing more than any savings.
There is one further thing that will worry property owners: The Green Deal commitment stays with the home and passes on to the new owner. This could restrict saleability as potential buyers might not understand or welcome an extra debt. And if the buyer does not feel comfortable taking over the Green Deal loan then the owner may be forced to repay the Green Deal off early. Should this arise, the Green Deal provider is allowed to charge a fee for early repayment if they want. This is because under the regulations for the Green Deal the provider is entitled to claim for the interest that would have been paid by the homeowner should the Green Deal have run its course. According to Which? magazine this early repayment fee could be substantial.
It’s hard to imagine that any homeowner is against making their property more energy-efficient. And purchasers should take comfort that the property is energy-efficient. Clearly, they would want to see evidence of the work that had taken place and that any measures were resulting in cheaper bills. There’s also ample protection available to buyers and sellers around Green Deal installations. Government regulations mean that measures carried out under the Green Deal are guaranteed for a minimum of five years.
One final thought from us: it is worth remembering that the Green Deal it is not the only way to pay for energy-efficient installations – increasing your mortgage is an option. And savvy property owners will be able to weigh up the options soon enough when the Green Deal interest rates and terms are known.