Environmentally conscious decisions drive growth in discount ‘green loans’

More banks are offering loan incentives for buyers to make more environmentally conscious decisions when purchasing or up­grading their homes.

West Sydney residents Amanda and Trevor de Souza, with twins, Alexander and Oliver, are looking for an energy-efficient home to buy. Picture: John Feder/The Australian

More banks are offering loan incentives for buyers to make more environmentally conscious decisions when purchasing or up­grading their homes.

“Green loans” are the latest trend for lenders to encourage people to buy energy-rated homes or install efficient appliances and products – such as rainwater tanks, insulation or solar panels – by ­offering attractive repayment rates or discounts.

NAB is the latest bank to offer the loans, with a lower base variable mortgage rate of up to 1 per cent a year on a home loan and a 5 per cent reduction on the cost of lender's mortgage insurance if the deposit is less than 20 per cent as long as the property meets minimum sustainability criteria.

Executive of home ownership at NAB Andy Kerr said the loan was primarily aimed at young ­people and offered a cost-of-living benefit as inflation pushed the price of goods higher.

“The two biggest concerns for Aussies (are) cost of living and climate,” Mr Kerr said

“Climate is the biggest economic transformation since the Industrial Revolution … and I think what we realised is that it's becoming a core expectation from ­customers.

“We’ve taken a really deliberate focus on higher loan-to-value-ratio lending because … we know that skews to younger Australians and we know that concerns around climate are even more accurate for younger Australians.”

A report from home loan comparison site Finder reveals just under half of Australians (46 per cent) actively look for green products or services. Finder’s home loan expert Sarah Megginson said it was still a new area with only a handful of providers, but more lenders were involved every year.

“Several Australian lenders now offer some very competitive interest rates to customers buying energy efficient homes,” Ms Megginson said.

“Finder analysis found a number of green choices could actually save money, and some of the simplest switches have the largest impact on carbon emissions.”

CBA was the first of the big four banks to offer green loans in July 2021, offering borrowers $500 to $20,000 at a rate of 0.99 per cent to install eligible clean energy products in their homes.

Amanda and Trevor de Souza, 36 and 38, are looking for a home in Sydney’s west and hope to buy one that is energy-efficient.

Ms de Souza said taking the step had a small cost-of-living benefit now and a long-term benefit for the environment and future for twins Alexander and Oliver, 8.

“A huge thing I look for in a house is solar panels,” she said. “We see a huge difference in the bills we receive.”

“In terms of the build, we look at the heating and cooling system and when it comes to appliances, the energy efficiency rating is a huge thing.”

Australia’s housing accounts for about 15 per cent of the nation’s total greenhouse emissions.

In August, state and federal building ministers agreed to raise the minimum Nationwide House Energy Rating Scheme ­(NatHERS) rating for all new units and houses to seven. A score of six has been the baseline since 2013.

Green Building Council of Australia chief executive Davina Rooney said more awareness of sustainability in the home was good for buyers and the industry.

“There is evidence from overseas that these initiatives are better for the bank, better for the environment and better for the people who live in (the homes),” she said.

NAB’s new loan, offered with insurance partner QBE, requires a minimum NatHERS rating of 7 or GBCA green star rating.