Mark Bayley, Chief Executive of the Green Deal Finance Company, has this afternoon confirmed that the Company has signed a package of financing agreements which will provide a total £244m funding package for the set-up, financing and administration of Green Deal Plans.
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 has puiblished 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.
The Green Deal allows householders to make energy-saving improvements to their homes at no up-front cost. These Green Deal Plans must meet a "Golden Rule" that stipulates that Green Deal Plan repayments must not be greater than the expected reductions in energy bills. Unlike any other form of finance, the Green Deal charge stays with the property so improvers only pay whilst they enjoy the benefits. For more information on the Green Deal see www.gov.uk/greendeal
The Green Deal Finance Company is a not-for-dividend company established to provide financing to households, via Green Deal Providers, to enable them to carry out energy efficiency improvements to their homes under the Green Deal programme.
The company has 55 members from across the public and private sector who want to support the programme's roll out through long term, low cost finance for as many people as possible. TGDFC acts as a central finance company which, by aggregating Green Deals, can access capital market finance and lend to households, through Providers, at more competitive rates and for longer terms than personal finance alternatives.
By offering low cost finance, TGDFC allows the maximum number of measures to be financed under a Green Deal Plan while meeting the Golden Rule. Because of the fixed costs of setting up and administering these loans, the more measures a household takes out, the cheaper the all-in annual cost.
