Bank Australia partners with CEFC to launch first 'green' home loan with rock bottom rates

author-avatar By on January 14, 2020
Bank Australia partners with CEFC to launch first 'green' home loan with rock bottom rates

Photo by Vivint Solar on Unsplash

Australians could soon be rewarded with home loan interest rates as low as 2.44% if their home meets high energy efficiency standards.

The federal government's Clean Energy Finance Corporation (CEFC) is investing up to $60 million in a green home loan program for borrowers who meet a minimum seven-star energy rating.

Bank Australia is the first lender to take up the scheme through its new Bank Australia Clean Energy Home Loan which will offer eligible borrowers a 0.4% discount on their home loan interest rate for up to five years for mortgages below $1.5 million.

According to the CEFC, this will be "the first Australian green home loan to use energy efficiency measurement tools to determine eligibility".

The discount applies to borrowers who buy or build homes which achieve a minimum of 7-stars under the Nationwide House Energy Rating Scheme (NatHERS). A six-star energy rating is the minimum standard in most states and territories.

The Clean Energy Home Loan is available on Bank Australia's Premium Package Home Loan for new and existing customers, including refinancers.   

The 2.44% p.a. interest rate is available as a two-year fixed rate (3.50% p.a. comp rate*) or a three year fixed rate (3.43% p.a. comp rate) to borrowers with an loan-to-value ratio (LVR) of under 70%.   

The Clean Energy Home Loan is also available at a variable rate of 2.78% p.a. (3.39% p.a. comp rate) for those borrowing over $500,000 at an LVR of less than 70%.

CEFC CEO Ian Learmoth said the green home loan will spearhead the construction of market leading, energy efficient housing.

"This green home loan will fill a gap in the market, giving builders and new home buyers a financial incentive to adopt sustainable design principles from the start of the project," Mr Learmoth said.

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

"Australians are already leading the world in residential rooftop solar. Our next challenge is to embrace better building design and construction methods, as well as energy efficiency, to cut our energy use and reduce our emissions."

The table below displays a selection of variable-rate home loans on offer, featuring a low-rate pick from each of the following three categories: the big four banks, the top 10 customer-owned banks, and the larger non-banks.

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
VariableMore details
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
FixedMore details
NO UPFRONT OR ONGOING FEES

Basic Home Loan Fixed (Principal and Interest) (LVR < 70%) 3 Years

NO UPFRONT OR ONGOING FEES

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. Rates correct as of September 28, 2021. View disclaimer.

Bank Australia Managing Director Damien Walsh said in the coming months the bank will extend the benefits of the Clean Energy Home Loan for existing homeowners that implement eligible sustainable upgrades, such as energy monitoring and energy storage systems, solar hot water and energy efficient air conditioning.

The Clean Energy Home Loan will also feature an 'Eco-pause' option which allows customers to take a break from their mortgage repayments and redirect their money to eco-upgrades, such as solar panels, batteries and water tanks. 

The property sector accounts for almost a quarter of Australia's greenhouse gas emissions, according to the Australian Sustainable Built Environment Council (ASBEC).

Half of those emissions come from residential buildings, mostly as a result of heating and cooling, lighting and hot water systems. 

Mr Walsh said Australia needs more sustainably designed and built homes to reduce emissions and address climate change.

"Homes are built for the long haul. It's predicted that more than half the properties that'll be standing in 2050 will be built from now onwards," he said.

"This means that the housing decisions we make today will impact emissions - we just have to decide if we want that to be a positive or negative impact. We want to help homeowners and buyers who make sustainable choices to create positive impact.

"I want a future where every buyer asks for the energy efficiency certificate when they inspect a property, for real estate websites to have a '7+ stars' filter, and real estate agents to promote energy efficiency ratings as a key selling point."

Mr Walsh said the decision to launch the Clean Energy Home Loan was driven by their customers.

"Our research tells us that our customers care deeply about sustainability and climate change, which was a big driver for us to launch a home loan that supports them to reduce the environmental impact of their homes."

A report from ASBEC and ClimateWorks Australia identified potential energy savings as high as 25% through the adoption of higher clean energy standards in new residential buildings. 

The report found the upfront costs would be more than offset by the energy bill savings, reduced spend on heating, cooling and ventilation equipment, and electricity network savings.


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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author-avatar
Emma Duffy is Assistant Editor at Your Mortgage and  Your Investment Property Mag, which are part of the Savings Media Group. In this role, she manages a team of journalists and expert contributors committed to keeping readers informed about the latest home loan and finance news and trends, as well as providing in-depth property guides. She is also a finance journalist at Savings.com.au which she joined shortly after its launch in early 2019. Emma has a Bachelor in Journalism and has been published in several other publications and been featured on radio.

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