Demand for heat pumps on the rise - how to lower the cost of installation

Incentives from government, energy firms and lenders help homes green-up.

A heat pump mounted on a brick wall
(Image credit: © Getty images)

Heat pump installations have risen by 10% every month since the Government's Boiler Upgrade Scheme started offering vouchers worth up to £6,000 in May 2022.

If this steady growth in demand continues, around 150,000 heat pumps will be installed by May 2025, according to the Energy and Climate Intelligence Unit pressure group.

This exceeds the funding of £450 million set aside for 90,000 vouchers, though the government says the scheme will not run out of cash. A Department of Energy Security and Net Zero spokesperson said: 'We are completely confident vouchers will be available through the Boiler Upgrade Scheme for everyone who wants a heat pump.’

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Heat pumps allow you to heat your home in an environmentally-friendly way. They are significantly more efficient than gas boilers, producing around four times the energy they use, and are more reliable, requiring minimal maintenance and lasting at least 20 years. They are seen as key to decarbonising UK properties as the country aims for net zero by 2050.

The growing demand for the new technology may be partly explained by a rush of recent incentives such as government vouchers worth up to £6,000, new cheaper heat pumps being offered by British Gas and Octopus, interest-free finance from E.on and cash rewards for mortgage borrowers at Barclays and Halifax.

We explain the costs and discounts you can get when deciding to install a heat pump.

How much does it cost to install a heat pump?

The average cost of installing an air source heat pump under the scheme is £13,000, according to the Energy and Utilities Alliance.

The government’s Boiler Upgrade Scheme offers a grant of £5,000 towards this cost, which means you could still pay up to £8,000 (based on the average installation cost).

But if you opt for a heat pump from Octopus Energy or British Gas you’ll could as little as £2,500 and £2,999 respectively when the government’s grant is included.

But other costs can emerge when you factor in necessary additional upgrades such as better insulation, larger radiators and the installation of a water tank. The Brookes family is spending £20,000 on their eco-heat pump: “We need a different type of radiator and pipework. We also have to insulate the loft and cellar, and stud out one particular wall.”

But don’t be put off by the thought of additional upgrades: 17% of homes in the UK are suitable for a heat pump with no additional work at all while another 50% of homes could be fitted with a heat pump for just £500 of additional costs, such as minor insulation, according to research by Octopus Energy.

It means 67% of households could be fitted with a heat pump for less than £3,500 after the government voucher is applied while just 33% need to spend more like the Brookes family.

What discounts are available?

Until 2028, the government is offering a £5,000 voucher towards the cost of an air-source heat pump or £6,000 for a ground-source heat pump. The government is expected to extend the scheme.

Octopus Energy’s heat pump product and installation costs are as little as £2,500.

British Gas’s heat pump product and installation costs as little as £2,999.

E.on offers interest-free finance for heat pump installation.

Barclays offers £2,000 cash rewards for new and existing mortgage customers who fit heat pumps in their homes. It also offers £1,000 cashback on solar panels and £500 on insulation or double glazing. No additional lending is required.

Halifax offers £1,000 cashback to its mortgage borrowers who fit heat pumps via Octopus Energy.

Nationwide will offer 5,000 of its mortgage customers interest-free loans between £5,000 and £15,000 to pay for ‘non-structural’ green improvements such as air source heat pumps and insulation from 1 June. Known as the 0% Green Additional Borrowing home loan, borrowers will enjoy an interest-free period between two and five years.

Katie Binns

Katie Binns is an award-winning journalist, and former Sunday Times writer where she spent 10 years covering news, culture, travel, personal finance and celebrity interviews. She has also written for the Times, Telegraph, i paper and Woman and Home magazine.

Her investigative work on financial abuse has examined the response of banks, the Financial Ombudsman and the child maintenance service to victims, and resulted in a number of debt and mortgage prisoners being set free.