What is the Warm Homes loan scheme?
The Warm Homes loan scheme is a new government backed way to borrow for solar panels, home batteries and heat pumps at a lower interest rate than you would normally get. The Government confirmed its launch on Monday 26 October, and the Treasury’s backing is meant to bring the cost of borrowing down.
Most of us spot a cheaper way to heat the house and then do nothing, because the upfront bill is eye watering. That gap between “I’d like that” and “I can afford that” is exactly what a Warm Homes loan is aimed at.
The official line, published by the Government on gov.uk, is that homeowners across the UK, including Scotland, Wales and Northern Ireland, get access to low interest and interest free finance. It covers solar panels, batteries and heat pumps.
Key takeaways
- The Warm Homes loan scheme was confirmed as launching on Monday 26 October.
- Some loans could be interest free, but lenders, rates and who qualifies have not been published yet.
- The Government says solar, a battery and a heat pump together could cut bills by up to £550 a year.
- Your energy tariff is the quick fix while you wait for the loans to arrive.
How does a Warm Homes loan work?
A Warm Homes loan works by having the Treasury partly back the lending. MoneySavingExpert reports that this should let lenders offer interest rates up to five percentage points lower than they otherwise would.
Its example: a lender that would normally charge 8% to fund solar panels could offer around 3% through the scheme. Some households could potentially borrow at 0%.
Loans run for a minimum of three years. According to MoneySavingExpert’s report on the scheme, the maximum you can borrow depends on what you are installing.
- Solar panels: up to £15,000
- Electrical storage batteries: up to £15,000
- Air to water heat pumps: up to £20,000
- Air to air heat pumps: up to £10,000
- Ground source heat pumps: up to £35,000
- Biomass boilers: up to £20,000
- Heat network connections: up to £7,500
- Micro renewable systems, such as domestic wind turbines: up to £20,000
MoneySavingExpert also says the loans can be used alongside the existing Boiler Upgrade Scheme grant in England and Wales, although how much funding you can get from both varies by measure.
What do we still not know about the Warm Homes loan?
We still do not know which lenders are taking part, what interest rates they will charge, exactly who will be eligible, or when applications open. MoneySavingExpert says the Government has not confirmed any of those details yet.
So treat any headline rate with caution. “Interest free” is the eye catching bit, but a loan is only cheap if the whole package is cheap: the rate, any fees, the length of the loan and what you repay in total.
For a rough benchmark, MoneySavingExpert says the cheapest mainstream personal loans are typically around 5.9% APR if you borrow £7,500 or more. It adds that scheme loans could be cheaper, but we do not know yet, and not every deal under the scheme will necessarily be the cheapest way to borrow.
Will a Warm Homes loan actually cut my bills?
It might, but the saving depends on your home, your usage and what you install. The Government says fitting a heat pump, a battery and solar panels together could cut energy bills by up to £550 a year, with more potential savings from a time of use tariff.
“Up to” is doing a lot of work in that sentence. Your own figure could be lower, and you also have the loan repayments to set against it. Get quotes from installers, ask each one to show how they reached their savings estimate, and compare the repayments with what you would save in a typical year.
If a time of use tariff is part of your plan, our time of use tariff guide explains how they work. Our heat pump cost guide and heat pump grant guide cover the other costs you will want to know about before you borrow anything.
What can you do while the Warm Homes loan details arrive?
You can check the tariff you are on today, because that is the part you control this week. A solar and battery plan could take months to price up, fit and finance. Your tariff can change in a few minutes.
If you have been on a standard variable tariff and have not looked at your options for a while, that is the Do Nothing Default at work. It is quietly expensive and it is quick to fix. Our average energy bill guide shows roughly what a typical household pays, so you can see where you stand.
Then keep an eye out for lender announcements. When rates and eligibility are published, compare them as you would any loan: total repayable, fees, term and what happens if you pay early.
Frequently asked questions about the Warm Homes loan
- Can I apply for a Warm Homes loan today?
- Not yet, as far as we can tell. The Government confirmed the launch on 26 October, but MoneySavingExpert says lenders, rates, eligibility and the date applications open have not been confirmed.
- Is a Warm Homes loan really interest free?
- Some loans could be, according to MoneySavingExpert, but the rate you are offered will depend on the lender. Always check the rate, fees and total repayable before you sign.
- What can a Warm Homes loan pay for?
- Solar panels, batteries and heat pumps are named by the Government. MoneySavingExpert’s list also includes biomass boilers, heat network connections and micro renewable systems, each with its own borrowing limit.
- Can I use a Warm Homes loan with the Boiler Upgrade Scheme?
- MoneySavingExpert says you can use the loan alongside the Boiler Upgrade Scheme grant, which covers England and Wales, but the combined funding you can get varies by measure.
- Will a Warm Homes loan lower my energy bill?
- Possibly. The Government says a heat pump, battery and solar panels could cut bills by up to £550 a year, but your own saving depends on your home and usage and you will have repayments to cover.
