This paper presents indoor thermal performance analysis of the potential for a Novel Direct-Expansion Solar Thermal Source Heat Pump (DX-STSHP) system to provide space and/or water heating for low carbon homes in the UK and Europe. The investigation is based on the steady-state modelling of the thermodynamic vapour compression cycle. The test is operated at a solar collector/evaporator temperature greater than room temperature. The system consists of a single unglazed solar collector with serpentine tubes to contain refrigerant oil, a positive displacement compressor, a flat plate heat exchanger (condenser) and a thermostatic expansion valve (TXV). The collector/evaporator, where the evaporation directly takes place is exposed to simulated solar radiation from 200 to 800 W/m². The compressor receives the working fluid from the serpentine tubes of the collector as saturated vapour, compresses it to a high pressure and temperature, and then delivers it to a condenser. The heat is extracted from the condenser and used to heat water to 35 °C or 55 °C, according to the demand. A series of indoor tests have been performed and the results show the average rate of heat gain at the condenser for space heating operation mode (water temperature 35 °C) is about 1700 W per day, and the daily average COP varies from 3.07 to 3.94. For water heating mode (water temperature 55 °C) the DX-STSHP could supply 117 litres of hot water a day with a final temperature of about 55 °C under various solar radiation conditions. Despite the low investment cost of the DX-STSHP, It easy to install and could perform well at high COP and at different weather conditions.