UK launches no- and low-interest loans for home solar panels and heat pumps

Overview

Updated Oct 30

Households across the UK can now borrow £7,500 to £35,000 at zero or low interest to install a heat pump, solar panels or a battery, with no upfront cash. Ten lenders began offering the government-backed Warm Homes loans on 27 October, and the discounts are steep: E.ON Next customers can get 0% APR through HomeServe Finance, and The Money Co-op lends at 2.7%.

The loans landed a day before Chancellor John Healey's first Budget, which kept the Boiler Upgrade Scheme at £400 million for 2027-28 but cut £1 billion from the £15 billion Warm Homes Plan. The Budget also let VAT on solar panels, batteries, heat pumps and insulation return to 5% on 1 April 2027, after years at zero. Households can stack them on top of an existing £9,000 heat pump grant

Why it matters

Borrowing at 0% can cut bills by up to £550 a year, but VAT on solar and batteries rises in April 2027.

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Key Indicators

£550/year

Potential annual bill savings

Typical saving from a heat pump, battery and solar combo, plus up to £300 more with a time-of-use tariff.

£7,500–£35,000

Loan range by technology

Ground source heat pumps top the range; solar panels and batteries cap at £15,000 each.

Best rate on offer

E.ON Next customers can take 0% APR through HomeServe Finance; government support cuts up to five percentage points off lenders' standard rates.

VAT on solar and batteries from April 2027

The Budget ends the 0% VAT rate on solar panels, batteries, heat pumps and insulation on 1 April 2027.

Initial participating lenders

Includes Tandem Bank, Homeserve, Sunsave, The Money Co-op and the South Manchester Credit Union.

Voices

Curated perspectives — historical figures and your fellow readers.

People Involved

Miatta Fahnbulleh

Minister for Energy Consumers, Department for Energy Security and Net Zero

Co-signed the Warm Homes Loan Scheme factsheet

Martin McCluskey

Minister at the Department for Energy Security and Net Zero

Co-signed the Warm Homes Loan Scheme factsheet

John Healey

Chancellor of the Exchequer

Delivered the autumn Budget on 28 October 2026

Organizations Involved

Department for Energy Security and Net Zero

Government department

Running the loan scheme while absorbing a £1bn cut to the wider Warm Homes Plan

The UK department created to manage energy security, net zero and consumer energy policy.

Tandem Bank

Digital bank

One of the first approved lenders in the scheme

A UK digital bank offering reduced-rate loans for solar panels and heat pumps through the scheme.

Homeserve

Home assistance company

Lending to eligible E.ON Next customers, including 0% APR terms on selected products

Home assistance company whose finance arm offers Warm Homes loans, including 0% APR options, to E.ON Next customers.

E.ON Next

Energy supplier

Offering 0% APR Warm Homes loans to eligible customers through HomeServe Finance

Energy supplier whose customers can take Warm Homes loans at zero interest on selected terms through a HomeServe Finance partnership.

The Money Co-op

Credit union

Offering Warm Homes loans at 2.7% APR

Credit union lending £7,500 to £25,000 at 2.7% APR for home energy improvements under the scheme.

Timeline

2025 October 2026

7 events Latest: October 29th, 2026 · 1 week ago

Tap a bar to jump to that date

October 2026
E.ON Next customers offered 0% APR loans through HomeServe Finance
Latest Market

Eligible E.ON Next customers can apply for Warm Homes loans with zero interest on selected terms, or spread repayments over a longer interest-bearing term.
October 29th, 2026
Budget keeps heat pump grants but restores VAT on clean home kit
Policy

Chancellor John Healey's first Budget held the Boiler Upgrade Scheme at £400 million for 2027-28, added £100 million for solar on social housing, and cut £1 billion from the £15 billion Warm Homes Plan. VAT on solar panels, batteries, heat pumps and insulation rises from 0% to 5% on 1 April 2027.
October 28th, 2026
The Money Co-op joins the scheme at 2.7% APR
Market

The credit union offers loans of £7,500 to £25,000 at 2.7% APR for qualifying home energy improvements, a rate it says is possible because of government funding for the scheme.
October 28th, 2026
Warm Homes Loan Scheme launches across the UK
Policy

Government-backed no- and low-interest loans for heat pumps, solar and batteries become available from ten lenders across England, Scotland, Wales and Northern Ireland.
October 27th, 2026
September 2026
Final scheme rules published
Policy

Warm Homes Loan Scheme rules laid out the financial mechanism: a capital grant of up to 20% of loan value, paid to lenders in arrears after verified installations.
September 2026
June 2026
Nearly 150,000 solar installations in first half of 2026
Market

Solar panel installations across the UK approached 150,000 in the first six months of 2026, driven by high energy prices.
June 2026
2025
Heat pump sales hit record high
Market

UK heat pump sales reached a record annual high for 2025, according to the government.
2025

Scenarios

Warm Homes loans top 50,000 installations in first year

Likely Resolves by Oct 31, 2027

Discussed by: Government projections and Energy UK's Warm Homes Plan analysis

Strong demand from households facing high energy bills pushes uptake past initial projections. The ten initial lenders expand their offerings, and DESNZ extends the £1.7 billion facility to more technologies. Adoption mirrors the roughly 150,000 solar installations seen in the first half of 2026.

Loan uptake stalls below expectations, scheme scales back

Possible Resolves by Oct 31, 2027

Discussed by: Cautionary parallels with the 2020 Green Homes Grant, closed after months of low uptake

Credit checks filter out many applicants, and households hesitate to take on debt despite the reduced rates. If installations stay well below target, lenders slow their lending and the government shifts subsidy toward grants rather than loans, repeating the pattern of the failed Green Homes Grant.

Scheme expands to new lenders, technologies, and fund levels

Likely Resolves by Q2 2027

Discussed by: DESNZ factsheet: 'further lenders and products expected to join the scheme as it develops'

The initial lender cohort proves popular, prompting DESNZ to add lenders, raise loan caps for battery storage, and integrate with the broader Warm Homes Plan grants. The £1.7 billion facility is drawn down faster than planned, and the loan range widens beyond the initial ten lenders.

Warm Homes Plan funding cut delays installations

Possible Resolves by End of 2027

Discussed by: InstaGroup, which welcomed the loan scheme but said the £1bn cut risks denting investor confidence and further delaying delivery

The Budget trimmed £1 billion from the £15 billion Warm Homes Plan without saying which grant streams absorb the reduction. DESNZ is expected to confirm the detail in the coming months. If grant-funded installations slow while loan uptake builds, the plan's aim of more than 450,000 heat pumps a year and solar on up to three million roofs slips further behind schedule.

Historical Context

3 moments from history that rhyme with this story — and how they unfolded.

2020-2021

Green Homes Grant (2020-2021)

The UK government launched a £1.5 billion voucher scheme offering up to £5,000 (£10,000 for low-income households) toward insulation and heat pumps. The scheme was plagued by delays, a complicated application process, and a shortage of certified installers.

Then

Far fewer installations than expected were completed before the government closed the scheme to new applications in March 2021.

Now

The Green Homes Grant became the cautionary tale for UK home energy finance — a well-funded program undone by poor distribution and administrative friction.

Why this matters now

The Warm Homes Loan Scheme is the government's next attempt to fund home upgrades. Its success depends on avoiding the distribution failures that sank its predecessor.

2010-2019

UK Feed-in Tariff (2010-2019)

The feed-in tariff guaranteed payments to households for electricity generated by rooftop solar panels. The guaranteed income stream drove a boom in UK solar capacity, which grew from less than 1 GW in 2010 to over 13 GW by the time the scheme closed in 2019.

Then

Solar panel installations surged as homeowners earned a steady return on their investment.

Now

The tariff was eventually judged too costly and closed to new applicants, but it left the UK with a large installed base of rooftop solar that still generates power today.

Why this matters now

The feed-in tariff shows how a reliable financial mechanism can scale clean home technology at pace — and what happens when the cost of that mechanism outstrips its political support.

2022-present

Boiler Upgrade Scheme (2022-present)

A grant program that pays households toward the cost of installing a heat pump. The grant is up to £7,500 for an air or ground source heat pump, or £9,000 for homes replacing oil or LPG heating until March 2027.

Then

The scheme made heat pumps cheaper but still left a gap for households unable to cover the remaining cost.

Now

The Warm Homes Loan Scheme is designed to complement the Boiler Upgrade Scheme, letting households combine a grant with a loan to cover the full installation cost. The Budget kept the grant at £400 million for 2027-28, rising broadly with inflation after that.

Why this matters now

Direct grants alone haven't reached the 'able to pay' market. The loan scheme fills the gap the grant program left behind.