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Heat Pump Finance UK Guide 2025
- The cost of an air source heat pump for a 3 - 4 bedroom home is around £7,000 – £13,500, with government grants able to cut down your costs by £7,500 or more.x
- There are many ways to finance your heat pump beyond grants, such as bank loans, contractor and manufacturer financing packages, and other government incentives available in the UK.
- Research by Energy Systems Catapult found that 83% of consumers would consider financing low-carbon energy systems over a fixed long-term period.
The UK government aims to install an ambitious 600,000 heat pumps by 2028, in line with targets to become Net Zero by 2050. Whilst this opens doors for installers and manufacturers alike, it’s essential for there to be aligned incentives for customers as well. This is where heat pump financing comes in.
From bank loans to manufacturer packages, and subscriptions to government grants, this ultimate guide by GreenMatch will walk you through everything you need to know about air source heat pump finance for your home in the UK, including best practices, tips and tricks to get you the best value for your money.
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- Quotes from local engineers
- Payment by finance available
- Save £7,500 with BUS grant
- How can I finance a heat pump or HVAC system?
- Heat pump finance example
- What companies offer heat pump financing?
- What financing options do heat pump contractors offer their customers?
- How does heat pump financing work?
- Are there interest-free financing options for heat pumps?
- Are there government grants or loans available for heat pumps?
- Can I get heat pump financing with bad credit or no credit check?
- What is the cheapest way to get a heat pump?
- FAQ
How can I finance a heat pump or HVAC system?
For starters, you might be wondering, how much does a heat pump cost? On average, an air source heat pump for a 3 - 4 bedroom home is around £7,000 – £13,500. There are several ways in which you can finance a heat pump or HVAC system in the UK, such as personal or home equity loans for heat pump procurement, contractor or manufacturer financing, and even credit cards. Certain government grant schemes, like the Energy Company Obligation (ECO4), also provide incentives for energy-efficient heating systems that are worth considering.
Here's a more detailed breakdown of the range of options available to consider:
- Mortgages: It’s often possible to finance a heat pump through your mortgage, with many banks offering cashback or interest-free periods to encourage eco-friendly home upgrades further.
- Personal loans: A standard personal bank or creditor loan can help finance a heat pump upgrade. Given fixed interest rates and predictable monthly payments, this is a safe option that does not require you to put down your home as collateral.
- Home equity loans: If you are a homeowner, this type of loan offers a cost-effective way to finance large projects like heat pumps, as they have a generally lower interest rate than personal loans due to the security provided by your home. As a downside, home equity loans are more complex to obtain and can take longer to secure.
- Green energy loans: Some banks in the UK offer specific energy efficiency loans, designed to incentivise home upgrades. These come with traditionally lower interest rates compared to standard personal loans.
- Contractor financing: Energy companies, providers and installers often have tailored quotes and financing options that can better suit your budget, including leasing or competitive rate loans. This makes a large investment more manageable through monthly payments.
- Credit cards: Many credit card companies come with interest-free introductory periods of up to 24 months, helping manage the upfront costs of a new energy system. This can be a great way to split the cost of a heat pump without incurring any extra costs. The downside is that if you cannot repay the balance before the interest-free period ends, this will likely be followed by a very high interest rate.
- Government incentives: Several initiatives by the UK government can provide partial or full cost coverage for a new heating system. For example, the Boiler Upgrade Scheme (BUS) offers up to £7,500 in grants to property owners for installing heat pumps. In addition, the Energy Company Obligation (ECO4) provides whole-house upgrades, which may also include a heat pump system. The downside is that these schemes are only reserved for those who meet specific eligibility criteria.
Financing a heat pump or HVAC system is relatively feasible with the options at hand. Finding the best approach for you will depend on your budget, intended payment duration, and interest rates. Yet, there are a few tips and tricks you can follow to ensure the best-case scenario:
- Get multiple quotes: Just as recommended when looking for an installer, comparing interest rates from different lenders and financing programs is a great way to land the best bargains. Researching and vetting your options will ensure you find the ones most worth pursuing.
- Ask for a cash price: Comparing the true cost of financing with a cash purchase can help you see whether financing your heat pump or HVAC system is even worth it. In some cases, you may be better off buying in cash. Some manufacturers even sell showroom models at a cheaper cost.
- Make a down payment: The larger the down payment you make, the safer your heat pump loan will feel. Reducing your loan amount by covering a portion will also mean smaller monthly payments, shorter durations and lower interest rates.
Heat pump finance example
With all the finance jargon and options at hand, the next steps can feel a bit confusing. To simplify the process of financing a heat pump, let's have a look at some popular scenarios to illustrate what this process could look like:
- Check your qualifications: To apply for a personal loan in the UK, you must be above 18 and have both employment and online banking information, including details of your income and spending.
- Check your credit score: A credit score is a specific rating that tells a bank how reliable you are in repaying a loan. A high credit score means you are more likely to be granted a loan, at larger sums, and with more favourable payment plans as well.
- Decide on an amount: It’s important to decide on a loan sum that is realistic to your investment, but also feasible to pay back. That way, you can protect your credit score and avoid unexpected costs.
- Estimate monthly repayments: You can use an online loan calculator to roughly estimate what your monthly payments might look like, but you’ll get a more accurate breakdown once you get a quote from a bank or loan provider.
- Apply for the loan: Once you’ve finalised the amount you want to borrow and how long you might need to pay it back, you can reach out to your bank or loan provider to apply. Make sure to get a personalised quote for the most accurate breakdown of what to expect.
Personal loans are not the only way to finance your heat pump. Some households may even qualify to make use of government incentives. One such popular incentive is the Boiler Upgrade Scheme (BUS), which grants up to £7,500 to property owners for installing heat pumps.
- Check your qualifications: UK grant schemes mainly target low-income, fuel-poor, and energy-inefficient households. Initiatives like the Boiler Upgrade Scheme (BUS) require you to be a homeowner with a valid energy performance certificate for your property (EPC) and an outgoing fossil fuel-based system.
- Apply for the grant: After selecting an MCS-certified installer, they will provide a quote, manage your grant application through Ofgem, and deduct the grant amount from your total cost. With BUS, you can get up to £7,500 in cost reduction.
It’s important to note that grant schemes do not usually apply to in-construction or newly built properties, which should, in theory, be built up to standard. Grant schemes aim to improve the energy efficiency of existing properties.
What companies offer heat pump financing?
Research and data by UK Finance, one of the largest trade associations in the country, representing over 300 firms, provides us with the six largest lenders in the UK as of 2024. Let's have a look at the mortgage agreements provided when adding £10,000 to a mortgage agreement from a lender:
| Mortage lender | Mortage offer | Monthly cost | Additional info |
|---|---|---|---|
| Lloyds | 85% of the home’s value, or 75% if you have an interest-only mortgage. | £76 | +£2,000 cashback |
| Nat West | Up to 90% of the property value for residential mortgages. | £76 | - |
| Nationwide | Up to 90% of the property value for residential mortgages. | £76 | + a 5-year, 0% loan for up to £20,000 |
| HSBC | Lends start from £10,000. | £76 | - |
| Barclays | Up to 85% of the home value, or 80% if consolidating debt. | £79 | +£2,000 cashback |
| Santander | Lends start from £5,000 and up to 85% of the home value. | £77 | +£2,000 cashback |
In addition to lenders for domestic housing, there are also green energy business loans provided by major banks in the UK. Here’s a breakdown of some green business loans that are available to make use of:
| Bank | Programme | Loan | Purpose |
|---|---|---|---|
| The Co-operative Bank | Renewable Energy Funding Scheme | £25,020 - £10 million | The Co-operative Bank offers a flexible funding scheme with both fixed and variable rate options, designed to help businesses of varying scales and durations invest in renewable energy projects. |
| NatWest | Green Loans | £50,001, with no upper limit for variable rate options | NatWest's green loans are made accessible to eligible businesses by waiving arrangement fees, offering a versatile financial product that supports a broad spectrum of eco-friendly assets for expanding sustainable operations. |
| Royal Bank of Scotland | Green Loans | £50,001 - £10 million | RBS offers affordable and adaptable loans specifically tailored for businesses to finance green assets and improvements, featuring no arrangement fees and options for fixed or variable interest rates. |
| HSBC | Go Greener SME Reward | Cashback reward programme | This incentive encourages small and medium enterprises (under £25 million annual turnover) to invest in renewable technologies by reducing borrowing costs and promoting sustainable business practices across the UK. |
What financing options do heat pump contractors offer their customers?
Heat pump contractors in the UK are making it easier for homeowners to invest in these energy-efficient systems by providing a range of financing solutions. Beyond simply paying upfront, customers often have access to flexible finance plans. These can include 0% APR options for shorter terms, typically between 6 and 24 months, or fixed-rate APR loans that extend over longer periods, from 36 up to 120 months.
Many installers simplify the process by partnering with trusted third-party credit brokers or finance providers, such as Ideal4Finance or Hiber, though a deposit is often required. Contractors also play a vital role in helping customers access government grants like the Boiler Upgrade Scheme (BUS). This scheme currently provides up to £7,500 in upfront grants for most heat pump installations in England and Wales, which is directly deducted from the total cost, easing the financial burden for homeowners seeking an energy system upgrade.
How does heat pump financing work?
Heat pump financing usually involves combining government grants with various loan options to make your upfront cost more manageable. The key grant scheme in the UK for energy systems is the Boiler Upgrade Scheme (BUS), which offers up to £7,500 in grants for eligible air or ground source heat pump installations.
Homeowners can also explore other regional or local council schemes, such as the Home Energy Scotland Grant and Loan or the ECO4, which may offer further grants or interest-free loans, often based on your income or property efficiency.
There are several financing avenues available, each with typical terms and rates to consider:
- Green loans: These specialised loans are offered by banks or credit unions for energy-efficient home improvements. Interest rates can vary, but recent examples show fixed APRs around 9.9% for loan terms ranging from 5 to 10 years. For instance, a balance of £4,850 (after a £7,500 BUS grant on a £12,350 heat pump) could result in monthly payments of around £53.30 over 10 years or £86.53 over 5 years at a 9.9% APR.
- Green mortgages: Some mortgage lenders offer tailored green products or allow you to extend your mortgage for energy-efficient upgrades, potentially at lower interest rates (e.g. 0.2% discount) or with longer repayment terms (e.g. up to 30 years), making monthly payments much more affordable.
- Financing via retailer or installer: Many heat pump installers partner with finance providers to offer direct financing packages. These often feature fixed interest rates (e.g., 9.9% APR) and flexible terms, typically between 5 and 10 years. Eligibility is subject to credit checks and usually requires a minimum deposit (e.g. 15%).
- Personal loans: Standard personal loans can also be used, but generally come with higher interest rates compared to dedicated green loans or mortgage extensions.
- Subscription: A newer approach, this method involves paying a monthly fee to the provider who owns the heat pump in exchange for upfront installation, maintenance, and sometimes even an optimised energy tariff. This method removes the high upfront cost of an energy system upgrade but involves a longer-term commitment from you.
It's important to remember that exact rates and terms will depend on your financial circumstances, the lender, the specific heat pump system chosen, and any eligible grants. While the upfront investment for a heat pump can be hefty, the combination of government grants and financing options can make the transition more accessible.
Are there interest-free financing options for heat pumps?
Yes, interest-free loans for heat pumps are available in the UK, though they often depend on your location and specific circumstances.
Here are the key ways to access interest-free financing:
- Grant schemes: The Boiler Upgrade Scheme (BUS) in England and Wales offers a substantial £7,500 grant that directly reduces the upfront cost. In addition, there is the Home Energy Scotland Grant and Loan offers both a grant (up to £7,500, or £9,000 in rural areas) and an optional interest-free loan of up to £7,500 for heat pumps.
- Green mortgages: Some UK mortgage providers offer "Green Additional Borrowing" mortgages that allow existing mortgage customers to borrow funds for energy-efficient home improvements at 0% interest for an initial fixed period. After this period, the outstanding amount typically reverts to their standard variable mortgage rate.
- Installer deals: Some heat pump installers, like those partnered with providers such as Novuna or Stax, may offer 0% interest deals for a limited period of 24 - 36 months. These are promotional offers, and credit is subject to status and affordability checks.
Are there government grants or loans available for heat pumps?
The UK government offers several initiatives designed to help property owners cover the costs of installing a new heat pump system, thus easing the financial burden for homeowners seeking an energy upgrade. These schemes can provide either partial or, in some cases, full funding.
Here’s a breakdown of the grants for heat pumps in the UK:
- Boiler Upgrade Scheme (BUS): The most prominent grant is the Boiler Upgrade Scheme (BUS), which provides up to £7,500 towards the installation of air source or ground source heat pumps. This grant is available to homeowners, small landlords, and self-builders across England and Wales.
- Energy Company Obligation (ECO4): ECO4 goes further by offering comprehensive "whole-house" upgrades for eligible low-income households and those in fuel poverty, which can include the installation of a heat pump system alongside other energy efficiency improvements like insulation.
- Home Energy Scotland Grant and Loan: This scheme offers a grant of up to £7,500 for heat pumps, with an additional optional interest-free loan of up to £7,500, bringing potential funding up to £15,000. Rural properties in Scotland may even qualify for a further £1,500 grant uplift.
While these grants offer substantial financial support, both the Boiler Upgrade Scheme and ECO4 have key eligibility criteria. Property owners will need to meet certain requirements related to their property type, current heating system, and sometimes their household income or benefits, to qualify for the funding.
Can I get heat pump financing with bad credit or no credit check?
Trying to finance a heat pump in the UK can feel tricky, especially if your credit history isn't up to par. While most traditional banks and government schemes like the Boiler Upgrade Scheme usually check your credit, you still have options:
- Financing with a bad credit score: If you have bad credit, some lenders or green finance providers might offer secured loans. These loans are often tied to an asset, like your home, which lowers the risk for the lender. This can make financing more accessible, though you might face higher interest rates. It's smart to first look into government or local authority grants, as these non-repayable options don't depend on your credit score; they usually focus on your household income or property type instead.
- No credit check options: When it comes to no-credit-check financing for a heat pump, options are extremely limited and come with higher risks. Loans without a credit check are rare for such significant investments because of the large amount of money involved. These arrangements often involve less regulated lenders and can carry very high interest rates or unfavourable terms.
Instead of risky "no credit check" solutions, it's recommended to focus on safer paths. Consider working to improve your credit score, or explore local council schemes and community energy initiatives. These can offer more sustainable ways to get a heat pump. Always remember to get advice from a qualified financial advisor before making any major investment decisions.
What is the cheapest way to get a heat pump?
Finding the cheapest way to get a heat pump in the UK combines government support with smart financing. The most significant financial assistance comes from the Boiler Upgrade Scheme (BUS), which provides a £7,500 grant for the costs of a heat pump. Beyond the BUS scheme, exploring local authority grants can uncover additional non-repayable funding specific to your region or household income, further reducing your upfront expenses.
For the remaining cost, various financing options are available:
- Green mortgages: These offer lower interest rates for energy-efficient homes, potentially making the long-term investment more affordable.
- Specialist green loans: Banks and credit unions provide loans specifically designed for eco-friendly home improvements, often with more favourable terms than standard personal loans.
While there is no best air source heat pump per se, saving money isn't just about cutting costs early, but also about how you leverage grants, schemes, and choices available to you. When financed smartly, the money you save on your energy bills each month can often offset or even exceed your loan repayments. Nevertheless, making the right decisions can seem daunting.
Most prospective customers often get lost in a process of endless research and vetting of potential installers to work with. In doing so, they miss out on bargains and spend countless hours surfing websites and scheduling phone calls. That’s where GreenMatch UK can help.
All it takes is 30 seconds to fill out our online intake form, giving you access to 4 free home-tailored quotes from our nationwide network of pre-vetted professionals. The best part? Our services are completely free of charges and obligations. Click below to begin!
- Quotes from local engineers
- Payment by finance available
- Save £7,500 with BUS grant
FAQ
We strive to connect our customers with the right product and supplier. Would you like to be part of GreenMatch?
- How can I finance a heat pump or HVAC system?
- Heat pump finance example
- What companies offer heat pump financing?
- What financing options do heat pump contractors offer their customers?
- How does heat pump financing work?
- Are there interest-free financing options for heat pumps?
- Are there government grants or loans available for heat pumps?
- Can I get heat pump financing with bad credit or no credit check?
- What is the cheapest way to get a heat pump?
- FAQ
- Quotes from local engineers
- Payment by finance available
- Save £7,500 with BUS grant