Investing in Great British homes

Designing a UK home upgrade loan

Construction, scaffolding, house construction, and development
Wooden house under construction and development. Photo by Avel Chuklanov on Unsplash.

Upgrades that make our homes cheaper and cleaner to run offer tremendous opportunities for British households. Many countries have introduced home upgrade loan schemes to make these retrofits more attractive and accessible. In this report, E3G considers a well-designed and effective government-backed home upgrade loan for the UK.

Upgrading Britain’s housing is essential to lower bills, reduce our dependence on gas imports, and meet carbon targets. Home upgrade loans can form an essential component of the policy mix.

Countries including Germany, France and Canada have all introduced loan schemes via their national development banks. These have been successful in helping hundreds of thousands of households to cut their energy costs. Comparative analysis of schemes in other countries shows how a UK scheme could be set up and designed to maximise uptake and value for money.

An attractive, consumer-orientated loan scheme can help the UK turn around its track record on low upgrade delivery rates. Such a scheme should be introduced following consultation and pilots to ensure effective design and deliverability. Supporting measures such as nationwide access to independent energy advice, and regulations to increase energy efficiency standards in the private rented sector, can ensure good awareness and uptake.

While there are no silver bullets in home upgrade policy, the introduction of a well-designed government-backed loan scheme can play an important role in boosting uptake of measures, as it has in other countries. The UK should look to the successes of comparable international policy, learn from our own past attempts, and consult with experts to design robust and fair policy. As well as providing a boost to our vital and valuable energy efficiency and green technology industries, a loan scheme can cut energy bills, reduce national reliance on fossil fuels to bolster our energy security, and create jobs.

Key recommendations for home upgrade loan scheme:

  1. Treasury should provide the UK Infrastructure Bank with a ringfenced, flexible, long-term draw-down fund for lenders, with loans delivered by a range of lenders (retail banks, credit unions, building societies etc.). Government must also bear risk without absorbing it completely, with UKIB guaranteeing a significant proportion of loans extended.
  2. Government must invest in making the retrofit journey consumer-focused and well-advertised, by supporting advice and awareness measures.
  3. Offer zero and/or reduced concessional interest rates to spur consumer uptake and encourage lender participation.
  4. Repayment terms must be flexible, favourable to the consumer, and follow international best practices. To include the ability to be spread over a longer period and being substantial enough to enable meaningful retrofit.
  5. An attractive and fair offer to consumers which caters to a range of households, including those with lower incomes, those in rural or off-grid areas, and those who may require or benefit from added flexibility.

Read the full report here.

Read the executive summary here.

Read the annexes here.


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