Green Deal increases landlords’ energy awareness

Energy performance ratings

The government’s flagship energy-saving scheme, the Green Deal, launched on Monday 28 January.

The initiative, which we discussed in an article late last year, allows homeowners to take out a loan to improve the energy efficiency of their property. The loan is then intended to be paid back through savings in the energy bill.

After approaching an installer with Green Deal provider status, homeowners’ properties will be surveyed by a Green Deal assessor and a report on the energy performance and potential improvements will be produced. If the expected energy savings outweigh the cost of the improvements, a loan will be given.

Assessments for the deal began last October, and the first loans became available this week.

Potential controversy of the scheme

There are a few key issues with the Green Deal which may be putting off potential customers.

Firstly, despite the loan being touted as having “no up-front cost”, many providers are charging to carry out the necessary assessments.

Secondly, the unsecured loan accrues interest as it is repaid through energy bills over a period of 10 to 25 years, at a rate of between 6% and 9% depending on the provider. With a £63 set-up charge and £20 per annum fee, detractors are saying that it homeowners will be unlikely to see savings. Indeed, there is no guarantee that the eventual savings will match the cost of the loan.

Thirdly, the loan stays attached to the property’s electricity bill, meaning that if the original owner moves house before the loan is repaid, the new owner would have to take on the repayments. This could make the home difficult to sell.

Landlord awareness

The Green Deal may, however, have been instrumental in increasing awareness of energy efficiency among landlords; a crucial development, particularly in light of new regulation regarding EPCs which came into force on 9 January.

Research from ARLA published on 28 January shows that, in December 2012, 61% of landlords had no properties with an F or G energy efficiency rating. This represented an increase of 11% on the previous year.

In addition, 12% fewer landlords surveyed were unaware of the energy performance of their property or properties than in 2011.

A recent YouGov poll shows that only 19% of 5,071 UK energy customers have heard of the Green Deal. When compared with the 58% of landlords who have heard it, according to ARLA’s research, this figure shows that landlords’ awareness outstrips that of the general public and suggests that the Green Deal may have been an important factor in increasing landlords’ energy awareness.

This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.