Green loans grow and deliver savings to energy-savvy borrowers

Cheaper interest rates are a side benefit of buying solar systems and electric vehicles as a new type of lending accelerates.

The cost of going green is dropping as more lenders deliver discounted loans for people buying electric vehicles, solar systems and energy-efficient homes.

A new analysis by financial comparison website Mozo.com.au reveals that green personal loan interest rates are an average 2.6 per cent lower than non-green loans, while EV loans are 0.9 per cent lower than standard new car loans.

Mozo found big banks and small lenders are increasingly offering lower rates for green energy renovations, a welcome move for households following a big spike in retail electricity costs this financial year.

It says the average personal loan rate as of January 10 is 9.33 per cent, compared with 6.75 per cent for a green personal loan. Green car loans average 6.56 per cent while regular car loans average 7.44 per cent.

Mozo spokeswoman Rachel Wastell said Australians were turning to green loans to reduce their carbon footprint and drive down costs, and the loans were likely to grow in popularity this year.

“Banks big and small are jumping on the green loan bandwagon, offering borrowers sustainable finance for solar at very low rates,” she said.

Installing solar panels can deliver big interest discounts as more banks offer green loans.

Mozo highlighted the Commonwealth Bank’s green loan offering of 3.99 per cent per annum for a 10-year fixed rate loan for its mortgage customers to install solar panels, battery backs and EV charging stations.

It said smaller lender Queensland Country Bank had received a positive response to its green products in 2023, while NAB is joining forces with listed fintech lender Plenti to offer green loans by the middle of this year.

“Banks may start competing for green loan customers,” Ms Wastell said.

“According to the Mozo database, there are 27 lenders that offer personal loans specifically for green purposes.

“There is a chance that customers who can afford higher cost sustainable purchases have a reduced risk of loan default, and the impact of sustainable home improvements can increase the value of assets. This makes these green loan customers quite valuable.”

Oracle Lending Solutions managing director Angelo Benedetti said some borrowers were getting discounted mortgages for building energy-efficient homes, but the cost of the green tech could be expensive.

The process could “sometimes be anticlimactic” for borrowers who had to outlay big bucks for the improvements necessary for a discounted green home loan, Mr Benedetti said.

“A lot of banks are offering cheaper products and long-term rate reductions if clients meet energy ratings,” he said.

“Some clients are adamant they want to do it, but a lot want to but can’t justify the large outlay initially,”

Smaller green loans for solar panels and other improvements were growing, Mr Benedetti said.

“We are getting a lot of inquiries,” he said.

“Power bills are getting out of control, and people are going for solar.

“Once interest rates go back to a better base level, I think we will see a lot more people are very conscious about doing solar and getting a better rate.”

Originally published as Green loans grow and deliver savings to energy-savvy borrowers