UK opens interest-free loans of up to £35,000 for solar panels and heat pumps

Households across the UK can start applying for interest-free or low-interest loans to cover heat pumps, batteries and solar panels after the government-backed Warm Home Loans scheme launched on Tuesday. Borrowing runs from £7,500 up to £35,000, with repayments stretched across years instead of demanded upfront. The goal is to get clean energy kit into homes that could never stomach the initial outlay.

The money is flowing through energy suppliers, not just high street banks. British Gas partnered with Tandem Bank, and E.On with Homeserve, to hand the loans straight to customers at a discount to typical lender rates. Air-source heat pump installations can be financed with up to £10,000, while ground-source systems qualify for up to £35,000, according to the Guardian.

The government reckons the savings are real. Installing a heat pump, battery and solar panels together could knock up to £550 a year off bills, with a further £300 a year available under a time-of-use tariff that charges less outside peak hours. Energy secretary Miatta Fahnbulleh called energy an everyday essential that must be affordable for everyone, saying the loans would help families make their homes warmer and cheaper to run.

E.On UK chief executive Chris Norbury pointed to a recent trial in Coventry, where fuel-poor customers combining a home battery with a time-of-use tariff saved more than £250 a year on average. He said the Warm Homes Loan scheme was an opportunity to take that further by removing barriers to low-carbon technologies.

The scheme's terms landed just a day before the chancellor delivers his first budget on Wednesday, which reportedly includes plans to scale back grants handed out through the boiler upgrade scheme. That programme is not expected to disappear, but sources say hundreds of millions of pounds will be cut from its £2.7bn five-year budget because Treasury officials regard it as a subsidy largely used by middle-class households.

The Guardian understands grants of up to £9,000 a year are likely to stay for homes off the gas grid that are stuck relying on pricey heating oil, and those grants could be stacked with the new loans to cover a heat pump's full cost. Other lenders signed up to the scheme include HTG Finance, Propensio, Secure Trust Bank, Selina Finance, South Manchester Credit Union, Sunsave, The Money Co-op and This Bank.