Government sponsored mortgage discounts for green home purchases

The Australian government's Clean Energy Finance Corporation (CEFC) has invested up to $60 million in green home loans with rates as low as 2.44 per cent this year.

The property sector accounts for around 23 per cent of Australia's greenhouse gas emissions, according to the Australian Sustainable Built Environment Council figures. Around half of it comes from residential buildings due to the use of heating, ventilation, air-conditioning, lighting and hot water systems the figures show.

This new discount loan is to encourage the construction and purchase of energy-efficient homes and help reduce household emissions. 

What is considered 'green' enough for the green home loan?

To qualify for the discounted rate, borrowers must submit certification that the homes they are buying or building have achieved a minimum of 7-stars under the Nationwide House Energy Rating Scheme (NatHERS) in addition to the normal borrowing criteria. 

CEFC executive director investment, Richard Lovell says the green home loan will fill a gap in the market to give builders and home buyers a financial incentive to adopt NatNERS design principles from the start of the project. 

"New homes built today will be in use for decades to come. We want those homes to have the strongest energy efficiency and to delivery the smallest carbon footprint possible.

"We believe this is a useful tool to get it happening in the market so that financial markets could support emissions reduction in the residential housing stock.

"We have the option of extending it and making it a recurring program, depending on the market response."

Which lenders offer green home loans?

Bank Australia 

The new Bank Australia Clean Energy Home Loan (BACEHL) offers qualifying builders and home buyers a 0.4 percentage point discount for up to five years on mortgages worth $1.5 million or less.

On a standard mortgage of $350,000, this would equate to savings of $1400 a year, or $7000 over the life of the loan. Half of the discount will be funded by the CEFC finance and the other half by Bank Australia.

Currently, there are three options for the BACEHL.

The 7 Star + opinion is for new builds or existing homes that meet a high standard of energy efficiency. In order to qualify for this BACEHL option, the property must have a NatHERS rating of 7 stars or higher which can be proved with a NatHERS Certificate completed by a HatHERS accredited assessor. 

Alternatively, a property can also qualify if it has a Residential Efficiency Scorecard rating of 7 stars or higher, excluding the impact of rooftop solar instalments; Passive House Certification; or, Green Star's Design & As Built score of 8 points of higher on the credit '15 Greenhouse Gas Emissions'. 

The Property Upgrade and High Energy Efficiency opinions are not available yet, but potential borrowers can register their interests online.

The Property Upgrade option is designed for existing homeowners that implement three or more eligible sustainable upgrades, or achieve a minimum 1 star improvement to the energy efficiency assessment as assessed by the Residential Efficiency Scorecard.

Meanwhile, the High Energy Efficiency option is a higher discount that can be applied to loans for new builds or existing homes that have three eligible sustainability features like a minimum NatHERS rating of 8 stars, a solar system, a battery or a real-time in-home energy monitoring system. 

Those who qualify for a BACEHL will receive an interest rate discount from the Premium Home Loan Package.

This package features:

• No redraw fee which is available during the fixed rate period of the home loan;
• Fee waived on your everyday banking, the Everyday Access or Mortgage Offset accounts;
• No annual fee on the bank's Platinum Rewards Visa Credit Card, and zero per cent on balance transfers for 12 months;
• No establishment fee for Personal loans and home loan top-ups, as well as
• 10 per cent off general insurance products across buildings, contents and comprehensive motors.

In addition, the interest paid back on any Bank Australia home loan will not be used to fund any industries that cause harm like fossil fuels, live animal exports, or nuclear weapons.

Bank Australia managing director, Damien Walsh says the decision to launch the Clean Energy Home Loan was driven by customers who cared deeply about sustainability and climate change. 

Mr Walsh says, "Our customers have told us that they care about sustainability and action on climate change and Bank Australia is a customer-owned bank, so we seek to reflect their values and take priority on the areas that are concerned to them."

"We want a high proportion of our loan book to be energy-efficient homes, and we want to be able to track progress towards emissions reductions in our portfolio.

"An individual home may not have huge emissions, but when you add up all the homes we finance, that's a really big opportunity for us to make a difference by helping customers reduce the environmental impact of their homes," he explains. 

Mr Lovell and Walsh both agree that the $60 million initial investment could be extended by both Bank Australia and the CEFC depending on the uptake. 

Regional Australia Bank

The Regional Australia Bank's Sustainable Home Loan features a variable rate of 3.31 p.a. 

To qualify for the Sustainable Home Loan, the borrower's home must have at least one feature from List A and at least two features from List B: 

Source: Screenshot of Regional Australia Bank 

This Sustainable Home Loan also features:

• 100 per cent Offset Accounts with up to eight per loan account;
• Split Loan options;
• Advance payment options;
• Option to redraw;
• a maximum term of 30 years;
• an interest only payments available for up to five years;
• Discounted Interest Rate on Your Choice Visa Credit Card; and 
• Waived Access Fee on Transaction and Savings Accounts.

There are similar options available at Bendigo Bank, Maleny Credit Union, and Hunter United but are not supported by CEFC. 

Mr Lovell says CEFC would like to see other lenders follow suit, "we are absolutely keen to see other banks and non-banks develop similar products in the same space and we're more than happy to work with any financiers that do want to try."