The green banking trend that could save you $6000

Worried about rising interest rates, record energy prices and worsening climate change? A new banking trend might help – green home loans.

Banks are starting to offer mortgage discounts to customers who improve the energy efficiency of their homes.

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By installing solar panels or removing your gas connection, you could be eligible for reduced interest payments on your home loan for five years.

Bank Australia was the first out of the blocks, launching a range of “clean energy home loans” with discounts of up to 0.3 percentage points at the start of 2020.

About 23 per cent of Australia’s emissions are from buildings, with half of that from residential homes.

Bank Australia deputy chief executive John Yardley says the discount is designed to help customers to “do the right thing”. “We wanted people to realise there’s no trade off between home loan borrowers making a choice between positive impact on climate and your financial wellbeing,” Yardley says.

Since launch, the bank has written 320 loans under the scheme, worth $137 million by the end of May 2022.

Commonwealth Bank followed suit in April, launching a “CommBank Green Loan” that provides a 2.49 per cent a year standard variable rate – a 2.81 percentage point discount on its 5.3 per cent reference rate.

Data compiled by analytics firm Finder for Clean Capital found customers with an average loan size ($611,158, according to RBA figures) who took advantage of these schemes could save between $5848 and $43,286 over a five-year period.

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However, Finder head of consumer research Graham Cooke says comparing direct savings is difficult, and advised consumers to shop around for the best interest-rate deals.

“These products offer savings starting from around $6000, depending on the rate you’re comparing it to,” he says. “My main advice would be not to take the rates quoted on a bank’s website verbatim. Your best bet is to obtain quotes from at least two different banks and play them against each other.”

Green Building Council of Australia chief executive Davina Rooney predicts all banks would soon offer green home loans, as they face pressure from regulators and investors to act on climate change. “I would say we’re in the early part of the exponential curve,” she says.

Rooney says Australia’s commercial property stock is among the most sustainably built in the world; however, the residential sector is falling behind without proper rules to track and improve efficiency.

“I know the energy rating of my fridge, but I don’t know the energy rating of my house – the most valuable asset in my life,” she says.

The green loan mortgage relief can free up cash to retrofit existing homes, or build sustainably from scratch. The investment starts at $15,000, on average, Rooney says, but long-term savings from bills means homeowners are “better off from day one”.

Green activist Market Forces campaigner Will van de Pol welcomed the rise of green home loans, but says they are countered by the banks’ ongoing financing of fossil-fuel projects.

“Every dollar that is spent on expanding or extending the life of the coal, oil and gas industries is out of line with the goals of the Paris Agreement,” he says. “That lending can’t be undone with a bit of financing for cleaner homes.”

Yardley understands attracting the growing market of the environmentally conscious is about more than just loan products, and welcomes the competition. “Consumers are now very, very savvy about who is genuine and who is not,” he says. “And we think that’s a really good thing.”

  • Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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Source: Thanks smh.com