Retrofitting a home – insulation, a heat pump, solar PV – isn’t cheap, and most homeowners’ first question is what energy efficiency grants they can actually get. But grants are only part of the picture: the most important step happens before any application, whether that’s for a grant or a loan – working out what you can get funded for free, and what a lender should never be paying for in the first place.
In this blog you’ll learn:
- What energy efficiency grants and VAT relief to claim first
- How government-backed low-interest loans work
- What mainstream lenders offer for green borrowing
- Where council-backed loans fit in
- Why a survey should come before any of this
Energy Efficiency Grants: Claim Non-Repayable Funding First
Before considering any loan, it’s worth checking what’s available as a grant – money you don’t repay at all.
- Boiler Upgrade Scheme (BUS) – a flat £7,500 grant towards an air or ground source heat pump in England and Wales, with no household income limits or means testing. Apply via GOV.UK
- Warm Homes: Local Grant – up to £30,000 per home (split £15,000 for insulation/fabric measures and £15,000 for low-carbon heating), for households with an income under £36,000 or on qualifying benefits, living in an EPC D-G property. Apply via GOV.UK – see our full guide to The Warm Homes: Local Grant for eligibility detail.
- 0% VAT on energy-saving materials – heat pumps, insulation, solar PV and batteries currently qualify for 0% VAT, running until 31 March 2027 before reverting to 5%. See GOV.UK guidance
Together, these can meaningfully reduce – or in some cases fully cover – the cost of a retrofit before any borrowing is needed at all.
Government-Backed Low-Interest Loans
Where grants don’t cover the full cost, government-backed loan schemes are typically the next-cheapest route.
- Warm Homes Plan – the government’s wider £15bn programme includes low- and zero-interest financing for “able-to-pay” homeowners funding solar panels, heat pumps and batteries. Read the government’s announcement
- Home Energy Scotland Grant & Loan (Scottish homeowners) – a £7,500 grant for a heat pump plus up to £7,500 for wider energy efficiency measures, backed by an optional interest-free loan. A £1,500 rural uplift raises the cap to £9,000 for remote, rural and island homes. See Home Energy Scotland
Green Mortgages and Bank-Led Borrowing
If you already have a mortgage, your existing lender is often the cheapest place to borrow beyond what grants and government schemes cover.
- Nationwide’s 0% Green Additional Borrowing – existing mortgage holders can borrow between £5,000 and £20,000 at 0% fixed interest over 2 or 5-year terms, provided the funds go towards eligible energy efficiency improvements. See Nationwide’s terms
- Barclays’ Greener Home Reward – existing residential mortgage customers can claim up to £1,000 cashback for solar PV, solar thermal or battery storage, or up to £2,000 for a heat pump installation. See Barclays’ terms
Terms and eligibility on bank-led products change, so it’s worth confirming current rates directly with your own lender before assuming you qualify.
Council-Backed and Community Loans
For homeowners who don’t have a mortgage, or who don’t qualify for mainstream bank lending, council-backed community interest companies offer another route.
- Lendology C.I.C. – a council-backed CIC offering ethical, fixed-rate loans (representative rates around 4.2% APR) for home repairs and energy efficiency upgrades. See Lendology’s loans
Get the Sequence Right Before You Borrow
Borrowing £15,000 for a heat pump is a poor financial decision if the house it’s going into leaks heat like a sieve – a heat pump working against a poorly insulated, draughty home costs far more to run than it should, whichever way you’ve financed it.
Before applying for any grant, loan or mortgage add-on, a Home Energy Survey sets out exactly which measures to fund, and in what order – so borrowed or granted money goes toward the improvements that will actually cut your bills, rather than a heating system your home’s fabric can’t yet support. See our guides to Retrofitting Your House: A Step-by-Step Guide and Sustainable Ways to Heat Your Home for how that sequence works in practice.
What’s Next?
Energy efficiency grants, VAT relief and low-interest loans can cover a meaningful share of a retrofit’s cost – but only once you know which measures your home actually needs, and in what order.
Get in touch if you’d like help working out what to fund first.