The government has billed its green deal as "the most ambitious home improvement programme since the second world war", but it has now been revealed that just 12 homeowners are making repayments through its finance package for energy-efficient work carried out on their property.

Since the scheme's launch in January, householders have been able to sign up to the deal, which allows them to pay for energy-efficiency improvements to their home with no upfront cost. Work is funded by a loan repaid through their electricity bill, on the promise that annual repayments won't be more than the savings made from the energy-efficient changes.

Figures released by the Department of Energy and Climate Change (DECC) show that by the end of August just 372 households had actually signed on the dotted line – and only 12 had taken out a loan and had the work done. This is despite the government spending about £16m on the project so far, and setting a target of signing up at least 10,000 households by the end of the year.

Decc says in defence of the project that 71,210 householders had undergone the assessment part of the process by the end of August, and that many of these had chosen to pay for improvements themselves, with 80% saying they intended to install at least one energy-saving measure.

It adds that over the summer months homeowners are less likely to be considering energy efficiency, but as we approach winter there will be greater interest in the deal with consumers keen to save on sky-high energy bills.

Why is take-up slow?



One thing that might be putting people off is the interest rate charged on the loans of about 7%. This is not particularly competitive compared with other financial options, such as extending a mortgage for as little as 3%.

"The principle of the scheme is commendable, although it seems overly complex," says Tom Lyon, energy expert at comparison site uSwitch.com. "The jury is still out, however, on whether consumers will want to take a loan when there are other financing options available, and they might qualify for free improvement work."

Many homeowners are discouraged by reports of rogue companies trying to cash in on the scheme to get work. Added to that, the loans are paid back over up to 25 years and apply to the property not to the individuals who take them out, which means that anyone selling their home will be passing on this liability to the buyer.

Tracy Beauchamp.

Tracy Beauchamp, from Inverness, claims the scheme is "a shambles". She didn't even reach the stage of seeking finance, after finding the first steps "a big headache". She signed up for an assessment in March at a cost of £150 for her two-bedroom home – the compulsory first step to find out what measures your property would benefit from and if you would qualify for a loan.

"This recommended that we upgrade our storage heaters to fan-assisted storage heaters," she says. The next step was to find an approved installer under the scheme, and a green deal finance provider. "I spent hours on the phone trying many of the companies on the list only to be told they weren't ready, or could only use their own assessments before offering a loan. I then tried some of the installers to get an idea of costs of replacing the heaters, but they said they couldn't provide the service where I live."

She adds: "I've called Energy Saving [Trust] Scotland, the assessor, the ombudsmen and others and I've had enough of it all." She has since received a refund of the £150 she initially paid. "The only change I've managed to make is putting in energy-saving lightbulbs – and I didn't need an assessment to tell me this was worthwhile."

Who is offering finance?

At present only 13 companies are offering the finance – the best known being British Gas – but that number should increase to about 60 by the end of the year, making it easier for people to access the scheme, says Decc.

Bob Towse, head of technical and safety at the Building and Engineering Services Association, says that the scheme is proving a success only when accessed through big energy suppliers, as they are able to provide a "one-stop shop package" for assessments, installers and the Green Deal loan. "The rest of the industry is still watching and waiting, and smaller businesses are finding it's a tough process to get accredited, and that's putting a lot of them off."

Despite the scepticism surrounding the green deal, the cashback option under the scheme has its uses, says Lyon. You don't have to take out a green deal loan to qualify for this, although you will need to pay for an assessment. Under the deal you can get cashback of up to £1,000, limited to 50% of the money you've spent – for example, £150 for floor insulation and £270 for a boiler – on a first come, first served basis. This element of the scheme has proved a success. By the end of August 8,404 vouchers had been issued, in the majority of cases after boilers were replaced.

Is there a free alternative?



Before paying for anything, check for any free help or subsidies you are entitled to. Depending on where you live, whether you claim benefits, or live in a property that is difficult to insulate, you may be able to claim free home improvements.

Under the Energy Companies Obligation (ECO) scheme, the big energy companies have to offer free cavity wall and/or loft insulation to certain homes. Also, many local authorities can make grants available to local residents to help them pay for energy-efficient measures.

Some suppliers have their own schemes. British Gas has launched Warm Up North, which aims to deliver energy-efficiency measures, including green deal packages, to up to 50,000 households across the north-east, especially those living in particularly energy-inefficient properties. It offers eligible customers, including those in receipt of means-tested state benefit, free measures, including boilers, solid wall insulation, and loft insulation to help keep their homes warmer through the winter.

To find out whether you are eligible for grants and discounts on energy-efficient home improvements, see the Energy Saving Trust website, or call 0300 123 1234. You may be able to apply for free assistance without going through the green deal scheme.