Upgrading to a heat pump is a great way to improve your home efficiency and save money. At Heat Geek, we’re passionate about helping people make the switch. Our systems are on average five times more efficient than boilers.
This means our heat pumps can cut heating bills, however, the installation may cost more than a boiler. That’s because you might want to install new radiators, pipework and a cylinder as well. Finance options can help people pay for this upfront cost.
Here’s a quick guide on what to think about when considering financing a heat pump. First, it’s worth remembering why it’s worth getting a heat pump in the first place.
Why Choose a Heat Pump?
Heating and hot water account for over 80% of typical home energy use, making heat pumps one of the most impactful changes we can make to reduce our homes' carbon footprint. Heat pumps use electricity to move heat rather than burning fossil fuel to generate it. Here’s a great explainer. That means they make your home zero carbon by using clean, green, electricity.
Our installations come with an efficiency guarantee, and they’re 1.5x more efficient than the national average. This high efficiency means you can still save money, even after repaying a loan, if you can secure a long-term, low-interest deal. According to MCS, the average installation costs just over £10,000. That is more than a boiler but could pay off in energy savings. Our customers typically see energy bills fall enough to offset their loan payments if they qualify for the right financing.
What Are My Financing Options?
There are plenty of financing routes available for those considering heat pumps. These include:
- Mortgages
- Personal loans
- Consumer credit, and
- Securing a loan against your home
This blog aims to provide general information that raises awareness of these options. It does not advise people to take out one over another. We encourage readers to consult a financial advisor for personalised guidance.
Mortgages
To begin, let’s get a sense of what is available in the mortgage market. Table 1 shows what was on offer from the UK’s six biggest mortgage providers. These lenders are responsible for around two thirds of the market at the time of writing (October, 29, 2024).
Of course there are other mortgage providers, many with interesting offers. For instance, Perennna Bank offers longer term, 30 year fixed mortgages, with a 0.2% discount on the interest rate if you install a heat pump.
There are lots of options available. The Green Finance Institute, an independent government advisor, lists over fifty green mortgage products. However, it’s a rapidly moving market and their list was last updated in August 2023.
Table 1 - Mortgages from the six largest lenders
Adding £10,000 to a mortgage from a lenderMonthly costOther relevant infoLloydsTheir mortgage offer£76£2k cashbackNat WestTheir mortgage offer£76
NationwideTheir mortgage offer£76Also offer a 5 year, 0% loan for up to £20,000HSBCTheir mortgage offer£76
BarclaysTheir mortgage offer£79£2k cashbackSantanderTheir mortgage offer£77£500 cashback
Other options
Many of these same banks also offer personal loans. However, they are typically higher interest rates and shorter terms than mortgages. At the time of writing, the cheapest £10,000 personal loan would cost closer to £200 per month (around 6.2% for 5 years according to Money Saving Expert).
Alternatively, you could pay for a heat pump using a consumer credit. Again, the rates are typically higher, though you can find lenders willing to extend the term. For instance, Tandem Bank offers 11.9% at 15 years. That would make a £10,000 loan cost £119 per month.
Finally, you could secure a loan using your home as collateral. For instance, a £10,000 loan from Selina Finance would cost £95 per month if you took out their 7.9%, 15 year loan. Alternatively, Lendology might charge you £74 per month for their 4%, 15 year loan, if you live in an area they are working in.
Eligibility and Next Steps
Of course there’s no need to borrow at all if you have funds you’d prefer to spend on a heat pump than save up for a rainy day. To reiterate, we want to be crystal clear, this blog merely aims to show what is possible. It does not provide financial advice.
Eligibility criteria will vary depending on the lender and type of financing. For specific terms, it’s best to contact providers directly to find out what might suit your needs.
The key point is that many lenders are eager to help customers finance home upgrades. That means you could enjoy a new, low carbon heating system that lowers your bills at no up front cost.
If you want to see how much it could cost to have a heat pump installed in your home then use our instant estimate tool below.
How Heat Geek Can Help You Get Started
Our online platform makes it easy to learn about heat pumps and see if one’s right for your home. Just enter your address here for an instant estimate of the installation costs and energy savings. If you’re interested, you can book a visit from a top installer who can even use Augmented Reality to show you what the setup will look like in your space. For any questions along the way, check out our Help Centre or visit our YouTube channel for in-depth videos on everything from the basics of heat pumps to rarer complexities.
