The interest rate on Green Deal loans is so high that home improvements will not save householders cash

The Green Deal  -  announced today -  is dishonest and utterly misleading. The interest rate to be applied on loans to finance eco-improvements is so high that homeowners cannot possibly hope to recoup their costs. On a loan of £5,000 the victim will pay interest on a ten year loan of just under £400 in the first year. (7.96%) Capital repayments are in addition.

The price of gas today is about 4.16 pence per kilowatt hour. (Source British Gas, standard rates for southern England). The average amount of gas needed for house heating in the UK is 14,000 kilowatt hours a year. No insulation measures costing under £5,000 and allowed under the Green Deal will reduce heating need by more than 5,000 kilowatt hours a year, saving a maximum of £208. (5,000 kWh times 4.16 pence). The typical householder will therefore lose several hundred pounds a year from participating in this wicked scheme.


There is one exception to this. Cavity wall insulation may provide a net financial benefit to householders even if they use the usurious Green Deal finance. (The interest rate on a small loan for cavity wall insulation will cost over 10% a year). But they would be far better taking out a personal loan and repaying it as quickly as possible. The Green Deal has early repayment penalties in addition to its other iniquities.


More analysis can be found in an earlier post on this site.