Green loans spike as government supports new home loan program

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Decades after the Bendigo and Adelaide Bank first started offering green loans, the product has this year taken off . The bank has reported a 600%-plus surge in its green home lending.

Those loans are for households looking to purchase products like new and used electric vehicles (EVs), solar panels, solar hot water, grey water treatment systems, double glazing, energy-efficient white goods, solar batteries, and electric vehicle charging stations.

On the actual home improvement and renovation side, the government backed Clean Energy Finance Corporation (CEFC) has made a $125 million commitment to support the Commonwealth Bank’s new Green Home Offer, intended to help cut emissions in the housing sector and improve energy efficiency in new and renovated homes.

The reduced-rate Commonwealth Bank loans will be available to customers who build or renovate to meet the new Green Star’ Home Standard requirements established by the Green Building Council of Australia.

The standards include things like installing rooftop solar, heat pump water systems, and achieving energy efficiency to a minimum 7-star Nationwide House Energy Rating. It also includes the absence of gas installation, with household electrification targeted.

“Australia’s residential houses and apartments are responsible for around 23% of overall electricity use and 11% of total carbon emissions nationally,” Assistant Minister for Climate Change and Energy Jenny McAllister said.

McAllister noted the Albanese government is currently developing a National Energy Performance Strategy to further improve household energy performance, as part of a $15.2 million  (USD 9.9 million) investment to look at the demand side of electricity use.

While Australia leads the world in rooftop solar uptake, its houses are notoriously inefficient with standards lagging well behind regions like Europe. Tackling this issue is one of the clearest “low hanging fruits” to drive down emissions, with all the required technologies commercially available today.

The report A Practical Guide to Electrification for Existing Buildings released by the Green Building Council of Australia with the support of the CEFC earlier this year found that transitioning buildings to meet net zero goals and switching to all-electric buildings comes with multiple benefits, including significantly reduced electricity costs for households.

Specifically, the Green Building Council found improved energy efficiency and the installation of rooftop solar reduces household energy bills by at least $800 a year.

Coming back to the Commonwealth Bank green loan program, the $125 million in finance from CEFC supports a discount of up to 0.18% p.a. on standard variable rates over a five-year period, matched by an equal discount provided by the Commonwealth Bank, and applies to the entire home loan.

For example, on a loan balance of $750,000 and with a discount of 0.18% p.a., customers could save about $1,350 in interest in the first year of the loan.

“This latest investment brings our total commitment to green home finance to $350 million since 2020, when the CEFC took the lead in supporting initiatives to boost Australia’s energy efficient housing,” CEFC CEO Ian Learmonth said.

CEFC finance for the CommBank Green Home Offer follows the launch of the Bank Australia Clean Energy Home Loan in 2020 with $120 million in CEFC commitments to support the sustainable housing and a $108.5 million commitment to the Firstmac Green Home Loan in 2021.

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