Rewarding homeowners for going green

Some lenders are providing discounted interest rates to customers who can demonstrate that their homes have certain energy-efficient features

GREEN LENDING is a small but growing segment of the finance industry that brokers should consider for clients who fit the criteria. Homeowners are being hit by the cost-of-living crisis, stoked by rising inflation and mortgage rates. One of their biggest expenses is power, with many people struggling to pay soaring electricity bills. Combine people’s desire to cut household expenses with a motivation to play their part in the battle against climate change, and it’s easy to see why mortgage-holders are choosing solar panels, water tanks, better insulation, LED lights, electric heat pumps, and other features to boost energy efficiency. It’s these environmental measures taken by homeowners that some lenders are rewarding by offering green home loans, typically in the form of discounted interest rates.

While small, Drummond says the sector is clearly on an upward trajectory, and it will continue to grow in demand and importance over the medium term to “ultimately become a mainstream offering in the market.” He says Gateway’s green home loan offering forms a pillar of its “Pocket & Planet” purpose, through which the bank strives to help its members financially, while offering products and services that help reduce environmental impact. “Many lenders will have different rationales for offering green loan options to brokers and their clients – clearly a growing demand in the market will push lenders to increasingly move into this space,” says Drummond. “For Gateway, we’ve been in the market for a number of years

investors, offering at least a 0.25% p.a. discount from its standard variable premium package for the life of the loan on properties with either a seven-star NATHERs rating or a Green Star Home certificate from GBCA. “We also have a green commercial mortgage offering a 0.15% p.a. discount for properties with appropriate certification,” Drummond says. “We’re particularly proud to have had our Green Plus Home Loan recognised by Mozo and Finder as an award-winning offering and to have had the product certified by the Responsible Investment Association Australasia (RIAA).”

will save you $463 per year on water bills

Green Star Home benefits

Drummond says green lending is predominantly in the unsecured space, with green loans for solar, home battery storage, and EVs. “In terms of home loans, there are options for homes with a range of energy-efficient features such as solar, insulation, etc and then those that require independent certification of a property’s energy efficiency.” This certification is usually from a body such as the Nationwide House Energy Rating Scheme (NATHERs) or Green Star Home from Green Building Council of Australia (GBCA). Gateway offers a range of green home loans, says Drummond. Its Green Plus Home Loan has options for both owner-occupiers and

“As more people build more homes that qualify for these green products, demand will increase and there should be more choice. The borrowers of tomorrow – Gen Z – are also much more climate-aware”

Mark Kevin, Mortgage Advice Bureau Sydney

energy efficient new build modular homes with rooftop solar panels. Green energy.

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Drummond says Gateway’s research showed an increased customer awareness of and consideration for green home loans over the past few years. “However, levels of awareness still remain low, with only four in 10 claiming to have some knowledge of green home loans in the market,” Drummond says. “The impact of climate change and cost-of-living pressures, particularly around energy costs, has driven increased enquiry into green lending as consumers look to make their homes more energy-efficient and reduce their impact on the environment.”

Kevin says if lenders can offer something better for people who have taken steps to achieve green outcomes, then the demand for green loans will grow. “There is a groundswell of people looking to take action on climate change, and brokers will step up, both at an educational and promotional level,” he says. “It again gives brokers another niche to differentiate on, with a suite of green lending products available to those clients who value this.” Kevin says he believes the reason there are not more lenders in this space is because there’s little in it for them – apart from corporate social responsibility and tying into broader environmental and net-zero strategies. He says when a lender is presented with the same client credit profile for one house that has a seven-star NATHERS rating and another house that is a normal home, the lender is giving up margin to reward the green home. “Perhaps at a macro level, if the banks were rewarded through lower capital requirements or cheaper funding for their green loan books, we could start to see genuine growth and competition in this sector.” There are other levers that will drive growth and innovation in this space, says Kevin, such as NSW BASIX standards that cover water, energy use, and thermal performance for all new-builds and renovations. “As more people build more homes that qualify for these green products, demand will increase and there should be more choice. The borrowers of tomorrow – Gen Z – are also much more climate-aware, and they are going to demand more as they start entering the housing market. “They may look for lenders who don’t finance fossil fuels, have good CSR polices, and who reward green borrowers with genuine products with real savings.” Kevin says green lending has exciting potential. “I think it will be a solid niche to play in over the coming years.” Drummond says Gateway invested early and heavily in the green lending sector. “We believe it’s the right thing to do, and that in time it will become an increasingly significant segment of the market. “The trends we’re seeing from enquiries, applications, and the growth of our green loans, coupled with the continued challenges of climate change and opportunities to transition to cleaner and more sustainable energy, will ensure this sector will only grow in popularity and importance in the market.”

“Climate change and cost-of-living pressures, particularly around energy costs, [have] driven increased enquiry into green lending as consumers look to make their homes more energy-efficient and reduce their impact on the environment”

Zeb Drummond, Gateway Bank

To get a better understanding of green lending, MPA spoke to Gateway Bank chief operating officer Zeb Drummond, and Mark Kevin, the managing director of brokerage Mortgage Advice Bureau Sydney.

Industry experts

Christopher Lee

MFAA head credit adviser, Finsure Finance and Insurance

Stewart Saunders

Heritage Bank

Mark Kevin

Mortgage Advice Bureau

Zeb Drummond

Gateway Bank

Industry experts

Zeb Drummond has over 18 years of banking experience, having worked across a range of disciplines in a variety of organisations, from the big banks to customer-owned banks, and has been at Gateway for eight years. As chief operating officer, Drummond currently leads Gateway’s sales and operational teams, including the direct and third-party sales functions, the customer service teams, and the lending origination, settlement, and transactional service teams. He also manages the relationship with Gateway’s broker aggregator partners.

Gateway Bank

Zeb Drummond

Mark has more than 20 years’ experience in the banking, insurance, and finance industries, with leadership roles spanning wealth management, financial planning, sales, and distribution for some of Australia’s most respected financial institutions. With master’s degrees in business administration and applied finance, he is a highly credentialled and well-respected finance professional who has a genuine passion for educating and coaching clients. Since joining the mortgage industry in 2021, Mark has built a thriving brokerage and won three industry awards along the way, including the recent Innovator of the Year award 2023 for his www.decipher.expert mortgage tech consulting business.

Mortgage Advice Bureau

Mark Kevin

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Heritage Bank

Stewart Saunders

MFAA head credit adviser, Finsure Finance and Insurance

Christopher Lee

MFAA head credit adviser, Finsure Finance and Insurance

Stewart Saunders

Heritage Bank

Mark Kevin

Mortgage Advice Bureau

Zeb Drummond

Gateway Bank

Industry experts

Gateway Bank

Zeb Drummond

Mortgage Advice BureauMortgage Advice Bureau

Mark Kevin

Heritage Bank

Stewart Saunders

MFAA head credit adviser, Finsure Finance and Insurance

Christopher Lee

Green home loans sector

Zeb Drummond

Gateway Bank

Mark Kevin

Mortgage Advice Bureau

MFAA head credit adviser, Finsure Finance and Insurance

Mark HarChristopher Leeon

Heritage Bank

Stewart Saunders

Mortgage Advice Bureau

Mark Kevin

Gateway Bank

Zeb Drummond

Future of the sector

Published 30 Oct 2023

Mortgage Advice Bureau (MAB) Sydney is a multi-award-winning, high-performing, dynamic team with a strong focus on assisting clients with complex needs that extend beyond straightforward home loans – although we do those very well, too. We think the quality of our work speaks for itself. Whether you want to put plans in place for your first home, refinance your current loans, or optimise your investment portfolio, we have access to hundreds of loans from Australia's leading lenders. We are the broker for the SMART investor, and since our inception we have carved out a niche as one of the leading SMSF lending brokerages in the country, helping clients build wealth for their retirement through property investment.

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Gateway Bank is one of Australia’s leading customer-owned banks and has been in operation for over 60 years. Gateway offers a wide range of products and services covering everyday banking, home loans, personal loans, reverse mortgages and commercial mortgages. Our Green Plus Home Loan has been recognised by Mozo as Australia’s best Green Home Loan in 2022 and 2023 and by Finder as Australia’s Best Green Home Loan 2023, underpinning the bank’s commitment to our ‘Pocket & Planet’ purpose.

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Highly efficient water fixtures

reduces mould as well as carcinogenic pollutants by up to 75% and pollen by 99%

Advanced ventilation system

keeps home cooler and can reduce your energy bills by up to 34%

Lighter-coloured roof

removes fossil fuels from the home, reducing the likelihood of asthma symptoms by up to 42%

No gas cooking or heating

reduces heat loss in winter by up to 25% and heating and cooling costs by up to 30%

Increased insulation

provide "flicker free" consistent lighting reducing eye strain and the risk of headaches

High quality LED lights

50% more effective at reducing heat transfer, keeping home warmer in winter and cooler in summer

Double-glazed windows

help save at least $800 on energy bills per annum

Solar panels

Source: Green Building Council Australia, KPMG Green Star Homes Standard Report, August 2023

Green Star Home benefits

Source: Green and Sustainable Finance in Australia, September 2023, RBA

for the purchase of green homes or renovations to satisfy green criteria. Lenders’ criteria include requirements to have solar systems or restrictions on a building’s age. Some lenders require an external property certification. There are three external certifications – all evaluate the energy usage and efficiency of buildings. One of these is the federal Nationwide House Energy Rating Scheme

Green home loans

for the purchase of new green vehicles. The National Transportation Commission defines an emissions threshold below which a vehicle is considered green. Electric, hybrid, and some internal combustion engine vehicles can achieve emissions below this threshold

Green automotive loans

to fund home-energy efficiency improvements. Common eligible improvements include the installation of solar panels and batteries and the installation of water tanks and greywater systems. These loans can be either secured or unsecured

Green personal loans

Drummond says as a well-established green lender, Gateway has seen solid growth in enquiries and applications through both its direct and broker channels in recent years. “It does still represent a small segment of the market, and there remain very few lenders actually with a differentiated green home loan offering. This in turn means that many brokers and borrowers have little exposure to the green mortgage options in the market.” Drummond says Gateway’s green home loan research suggests that borrowers looking for a green home loan are much less likely to approach a broker (20%), as opposed to the broader broker market share of about 70% of the mortgage market. “This appears to be a great opportunity for brokers to build their knowledge of green home loan options and include this in their offering to capture the growing market,” Drummond says. Kevin says brokers are not having conversations with clients about green lending, as there isn’t a strong enough reason to talk about it yet. “As the green loans sector builds, brokers could benefit by building a niche focus on it and market that accordingly,” he says. “It gives them another marketing angle and can tie in with their own green objectives. This can result in richer conversations with aligned client groups who can refer accordingly.”

now and have been able to support brokers and their clients who have been early adopters of green loans, as we see it as a growing segment and, importantly, see its alignment with our purpose.” Kevin says the green lending sector is vitally important and Australians should be rewarded for taking decisive action to reduce their carbon footprints. He says the level of awareness about green lending within the broking community is low. “The green lending sector today is still in its infancy, with few products available.” Kevin says right now clients are acutely focused on rates, fees, and keeping their heads above water. “We have not written a green loan, and I've had very few enquire about them. Aggregators and industry bodies certainly have a role to play in educating brokers, but I see it more in the lenders’ hands right now to build out the product offerings and promote their solutions. “I do see some value in this as a marketing niche that aligns with my own personal goals to go green and have a smaller impact on the planet.”

Brokers and green lending

Green loan offerings

Gateway’s broker team regularly runs sessions on Gateway’s offering, including its green lending options. “We are regularly communicating with our broker partners about our green offering and investing in key broker media channels to expand awareness of our offering,” says Drummond. He says there are only a few lenders offering green home loans – typically, customer-owned banks. “In order for the industry as a whole to drive growth in this segment, we need to see more options and innovation in the category across the sector. “Pleasingly, we’re starting to see increased focus on energy efficiency in the building sector, and this will help build the volume of eligible properties and therefore support awareness and growth in the sector.”

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