A flagship scheme set up to encourage homeowners to make their property more energy-efficient by installing measures such as insulation, double-glazing and new boilers today stopped accepting new loan applications after the Government abruptly axed its funding.

The Green Deal Finance Company, which adminsters the scheme, will no longer offer Green Deal loans, which can be used to pay for improvements upfront and then repaid over the next 10-25 years from the savings made from lower energy bills. But it said existing loans will not be affected.

The Government has also announced that the Home Improvement Fund, which enables households to apply for free cash to pay for energy efficient improvements, is separate and is not adminstered by the Green Deal Finance Company, will close on 30 September 2015 – or earlier if funding runs out first.

We've full information on how the Green Deal works in our Green Deal Mythbuster guide, which we'll be updating shortly.

'A great idea that was poorly executed'

Martin Lewis, founder and editor of MoneySavingExpert.com says: "The Green Deal was always a great idea that was poorly executed. Among the structural problems was the fact that making it a 'loan' was instantly off-putting for many; that it was far too complex; that the fact the loan was on the property not the individual made many worry about the impact on house value – and the interest wasn't that cheap.

"Truth be told, "green" doesn't sell – something we told the Government in the early days, suggesting what people are interested in is home improvements. It later on the back of this launched the "Home Improvement Fund" element of the Green Deal, which was monumentally popular and oversubscribed – then again, in effect it was just a cash giveaway. 

"We do need to improve the efficiency of the UK's housing stock, and we need to encourage people to do it in an easy accessible way, reaching more than just society's poorest.  Yet the Green Deal didn't deliver that well enough in its own right. The worry though is it'll just be taken away without anything to replace it."

Martin Lewis
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Here's what's happening to the Green Deal:

  • The Green Deal Finance Company is not accepting any new loan applications. Applications for loans made before 3.30pm on Thursday 23 July will be processed as normal, as long as there are no large errors in them which may change the application.
  • Nothing changes for those who already have a plan with the Green Deal Finance Company. It says these will continue as normal, and that people will still need to repay the loans, which will continue to be collected via their electricity bill.
  • The Green Deal Finance Company stresses that it is still solvent and still trading.
  • The Government says as the Green Deal framework is still in place, other finance providers could still come forward if they wish to enter the market.

Here's what's happening with the Green Deal Home Improvement Fund:

  • The current Home Improvement Fund offer, which pays up to £1,850 towards the cost of installing two energy efficiency measures (see the full list here), will close to applications on 30 September 2015 or when the remaining £4 million of funding runs out – whichever happens sooner.
  • The Government will not be releasing any further cash via the Home Improvement Fund.
  • The Government says existing applications and vouchers are not affected. If you want to redeem your voucher you must complete installation and submit the documents required to the Green Deal Home Improvement Fund Administrator on or before their voucher expiry date.

The Energy Company Obligations (ECO) scheme, which was launched alongside the Green Deal and gives grants to low-income households and people living in older properties, will continue to run until March 2017 – its future after that is under review.

Government pulls plug on Green Deal funding
Government axes funding to Green Deal: But no change for existing users

'Time to make new policy'

Energy and Climate Change Secretary, Amber Rudd, says the scheme is closing due to uptake being lower than expected – by the end of June 2015 around 15,600 Green Deal loans had been issued.

"It's now time for the building industry and consumer groups to work with us to make new policy and build a system that works," she says.

"Together we can achieve this Government's ambition to make homes warmer and drive down bills for 1 million more homes by 2020 – and to do so at the best value for money for taxpayers."

Mark Bayley, chief executive of the Green Deal Finance Company, says: "The most important thing at the moment is for us and the Department to reassure those who currently have Green Deal finance plans in place and those with approved applications, that today's announcement does not change anything for them.

"We have taken this step to make sure we can meet all our expected liabilities and to have an orderly run-down of new business, while protecting existing plan holders and those whose applications are eligible and have been approved."