With the Green Deal going live today, The Green Deal Finance Company (TGDFC) is completing its finance ready to lend to providers for the first Green Deal plans, immediately following their installation, and to meet demand for Green Deal Plans for 2013 and beyond.
Unlike personal loans, TGDFC will offer funding to every accredited provider and will offer the same competitive rate of finance to the widest possible range of consumers. Rates will be comparable to the best high street rates for long-term unsecured loans. But whilst these are accessible to barely half the population, TGDFC will lend to over 80%.
Green Deal Providers will determine their own all-in package to consumers. However, on the basis of the finance agreements being put in place, TGDFC are now publishing the interest rate and charges for finance to Green Deal Providers. TGDFC's initial interest rate will be 6.96% per annum. Each Green Deal Plan will have a set up charge of £63 and annual operating charge of £20 payable by providers who may choose to add this to the overall cost of finance to the household, depending on the size and length of the Green Deal Plan.
Because of the fixed costs of setting up and administering these loans, the more energy efficiency measures a household takes out over the lifetime of the product, the cheaper the all-in annual cost. So, if providers pass on all charges, someone doing the basics for £1,500 (on a 25 year deal) would pay a maximum all-in cost of 9.34%. But if that person takes out the full package of measures suitable for them, including solid wall insulation, loft insulation and other improvements totalling £5,000, they would only pay 7.67% - all funded by the expected savings on energy bills.
The most effective large scale, energy efficiency measures such cavity or solid wall insulation, can be financed over 10 - 25 years at interest rates of 7.96% - 7.67%. The "golden rule" is designed to ensure that expected savings on bills should be at least as big as the total repayments, including any interest rate. Those taking full advantage of the scheme could also currently benefit from over £1,000 in cash back from the Government.
Mark Bayley, Chief Executive Officer of The Green Deal Finance Company said: "Our all-in cost of finance shows that the more energy efficiency measures a household takes advantage of, the better the long term return in terms of savings, and the lower the cost of overall finance.
"The Green Deal Finance Company has been formed to deliver transparent, competitive long term finance to as many households as possible, helping people to install the maximum number of energy efficiency features that can be self-financed through savings in their energy bills. This finance will be widely available and inclusive. We estimate that four out of five energy bill payers in the population will be able to access this finance. We know of no other source of low-cost credit which is this inclusive.
"While we're committed to financial inclusion, we will only lend responsibly. That means finding other ways to help those already in default on their financial obligations. We will work with leading local authorities and providers to see how tailored local support, combined with the Government's £540m Affordable Warmth and Carbon Saving Communities programmes, can reach those who need additional help. "
Lucy Shadbolt, head of green deal, Instagroup, one of TGDFC's founding members, who are launching their offer to consumers on Monday, said: "Many of our customers are hard-pressed families struggling with rising fuel bills and aspiring to improve their homes. We are delighted to be able to offer such a competitive rate of finance which most of our customers would not normally be able to access. Because TGDFC is not-for-profit, our customers can be assured they are getting a good deal."
