Homeowners wishing to sell may find buyers are not prepared to take over Green Deal loan attached to the property’s energy bill
Homeowners taking out a loan under the government’s Green Deal energy efficiency scheme could find themselves having to pay off the debt before they can sell their property, according to consumer body Which?
Since January, householders have been able to sign up to the Green Deal, which allows them to pay for energy efficiency improvements in their home with no, or little, upfront cost; instead, these are funded by a loan repaid through their electricity bill.
Crucially, the “golden rule” of Green Deal is that you should not pay back more in loan repayments than you are saving on your energy bill – but this can mean that, depending on the cost of the improvement, you could be making loan repayments for as long as 25 years. The loan is attached to the property’s electricity bill until it is paid off, so if the person who has set up the deal moves house, the bill falls to the new owner.
Research by Which? shows that of the 2,070 people it surveyed in April 2013, a fifth (21%) would reconsider buying a home if it had a Green Deal loan attached to it. Almost half of prospective buyers (46%) would want a Green Deal loan paid off before they would purchase the property.
Which? executive director Richard Lloyd said: “With rising energy prices still one of the top consumer worries, measures that help people make their homes more energy efficient are vital to help save money on bills.
“The Green Deal might work for some people but, as with any financial product, whether it’s a good deal for you will depend upon your personal and financial circumstances.”
In January, The Observer warned about the possible implications of taking out a loan that comes attached to a property — even if the purpose of the loan is to save homeowners money on their bills.
A mortgage industry source told The Observer at the time: “We have concerns that a potential buyer looking at a property may not value the improvements carried out under Green Deal and may not want to pay for them. Buyers may also consider that the benefits of any home improvements have already been factored into the sale price, and that the loan repayments on their electricity bill are therefore an extra cost they don’t want to pay.”
There are also reports of rogue traders attempting to use the Green Deal to defraud householders. Caerphilly Trading Standards has recently received 17 complaints of people knocking on doors claiming that homeowners were entitled to around £10,000 of funding for free home improvements. The fraudsters then asked for an “administration fee” to undertake various tasks on behalf of the householder. But Tim Keohane, senior trading standards officer in Caerphilly, said that none of the people under investigation was registered under the scheme.
The Building & Engineering Services Association, which operates the consumer advice service the Heating Helpline, wants the government to do more to publicise the fact that only authorised installers will be able to identify themselves as “Green Deal installers” and use the Green Deal quality mark.