Green Deal firms opt for credit union bonds to offer 0% energy efficiency finance

9th November, 2013

A UK credit union is offering a 'green’ savings bond to Green Deal providers and installers to enable their household customers to invest in energy efficiency upgrades at nought per cent finance.

The 'green bond' provides "nought per cent interest" on short-term loans for householders looking to invest in energy efficiency measures such as insulation, greener boilers and draught proofing, but typically are finding they can’t get the Green Deal to cover the full costs of the installations or that the scheme is too complicated to apply for.

Dorset Energy Advice Centre (DEAC), based in Bournemouth, is marketing the bond alongside its new 'Greener Loan’ product. The two products are available to members of the DotComUnity Credit Union. One of the first customers to take out a DEAC bond is Wimbourne-based Green Deal Provider the Warmer Group, which says more than 100 local energy efficiency installers across the UK will be able to benefit from the scheme shortly.

"We’re making sure the finance mechanism works for Dorset and then we’ll roll it out to our network of UK installers," Danny Godfrey, managing director of the Warmer Group and chairman of 'The Snug Network’ steering group, told GreenWise. The Snug Network is the UK’s leading network of specialist insulation installers.

'Greener Loan'

DEAC’s 'Greener Loan’ offers a fixed rate of 9.4 per cent APR on loans up to £7,500 up to a maximum of five years, according to DEAC centre manager Phil Neale. This equates to a flat rate of 4.92 per cent – lower than the 6.96 per cent offered by the Green Deal Finance Company (GDFC).

The bond scheme has become available just as the Green Deal industry has launched a task group to examine how to make Green Deal borrowing more affordable following disappointing take up of the nationwide energy efficiency scheme since its launch in January.

Godfrey said the bond is attractive to companies such as his because it means householders end up recouping all the interest on the loan and have a cash bonus on top because they’ve effectively been paying into a savings plan at the same time as paying off their loan.

"The savings plan means that a customer that takes out a £2220 loan for two years will get the interest back of £212.15 plus another £264 – so a cheque totalling £476.15. And because they’ve replaced their boiler they’ll be saving on their energy bills as well," he explained.

'Golden Rule' shortfall

The Green Deal has been launched by the Government to tackle Britain’s 'leaky’ homes and cut carbon emissions – 38 per cent of the UK’s total greenhouse gas emissions come from buildings. It is supposed to enable householders to invest in energy saving measures by allowing them to pay for them over time through their electricity bill, instead of upfront. Under the 'Golden Rule’, the repayments are set so they do not exceed the savings on energy achieved by the improvements on a typical house.

But according to Godfrey the Golden Rule means lots of households cannot get the measures they need installed using Green Deal finance alone.

"People are asking themselves 'why am I having to put a deposit down when I thought this was going to be covered by the Green Deal?’," he said.

Godfrey said his company had only completed one Green Deal plan to date. "The Green Deal is incredibly complicated and people want to get their measures in place straight away. [The Greener Loan] is easy and flexible and surveyors are going out and coming back and telling us that customers like it."

Steve Randall, sales and marketing director, at Save Energy in Poole, said his customers were choosing 'Greener Loans’ because they didn’t want to have a finance plan attached to their property as is the case with the Green Deal. He said there were other financial institutions out there offering competitive products, but DEAC’s was the most transparent.

"It’s one rate, which makes it very easy to deal with," he said.

Neale said around 20 'Greener Loans’ had already been taken out and DEAC expected the figure to reach "200 a week" across England by the end of the year. He said he also expected to soon see the first bonds being set up by local authorities through the credit union so they too could offer loans to client groups they wanted to help.

Source: Greenwise Business

Industry experts will be discussing Green Deal for Homes and Businesses during a seminar at the Retrofit London conference at the Business Design Centre, London on 06 December. The seminar will revolve around how homeowners, social housing providers and businesses can access money, and what role the retrofit industry play in stimulating investment.

To view the full conference programme or to book tickets for the event, CLICK HERE.

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