Analysis from leading financial comparison site Mozo.com.au has revealed that green loans are boasting rates almost a percentage point lower on average than their non-green counterparts.

“Australians are increasingly turning to green loans to not only reduce their carbon footprint but to drive down costs. This has seen banks offering cheaper, more sustainable finance options” said Rachel Wastell, Mozo finance expert.

“Green loans on the Mozo database have substantially lower rates on average when compared to standard loans, benefitting borrowers two-fold with lower interest payments and in some cases lower energy and fuel costs”

According to the Mozo database, Electric Vehicle (EV) loans offer an average interest rate of 6.47%pa., compared to the standard new car loan average rate of 7.35%pa, which is 0.88%pa lower.

Over a 5 year period, on a $30,000 loan, this equates to $746 in interest saved.

As energy prices rise, renewables gain popularity

The latest Monthly Consumer Price Index (CPI)[1] released on Wednesday showed households are grappling with a 10.1% year on year rise in electricity prices. So, it was no surprise that Australian energy use and supply data for the 2021-22 financial year[2] showed renewable energy (solar and wind) accounted for 30% of domestic electricity consumption. This surpassed household electricity use for the first time and saw solar energy use increase by 25% year on year.

With energy prices rising, Australians are looking out for more cost-effective energy solutions, and with the Government Solar Rebate still offering households a rebate on up to $1,400 of rooftop solar installation costs, many Australians have made the switch.

“In line with the Labor Government’s plan to build Australia into a renewable energy powerhouse, banks big and small are jumping on the green loan bandwagon, offering borrowers sustainable finance for solar at very low rates.”

On the Mozo database, green loans for sustainable home improvements like solar panel installations are averaging 2.48%p.a. lower than standard personal loans. For some solar panel loans on the Mozo database, there are rates as low as 5.54%p.a. Over a 5 year period, on a $15,000 loan, this equates to $1,069 in interest saved.

"Consumers are becoming increasingly aware of the dual benefits offered by green loans - environmental sustainability and financial savings -  and banks have been following suit in creating targeted low rate products,” Wastell continued.

Banks step up their commitment to sustainable finance

As Australia accelerates its transition towards renewable energy the big four have been making big moves toward green finance.

CBA’s Commbank Green Loan offers a very competitive 3.99%p.a. for a 10-year fixed-rate loan. This is to be used for the installation of clean energy products like solar panels, battery packs, and Electric Vehicle charging stations, and are exclusive to eligible CBA home loan or investment home loan customers.

NAB is also making strides in the green finance space, recently announcing a strategic partnership with Plenti to launch a co-branded, secured automotive and electric vehicle loan product.

It’s not only the big banks taking the lead however, as regional banks including Queensland Country Bank carve out their niche in this space, with its multi-award-winning Green Reno Loan product starting at 6.49%p.a. that has garnered consecutive Mozo Experts Choice Award wins in 2023 and 2024.

The shift toward green finance at Queensland Country Bank, with its product offers on their ‘green’ product suite, has received positive uptake this financial year.

Queensland Country Bank CEO Aaron Newman says, “Our focus on sustainable finance is not just a trend but a commitment to providing our customers with innovative and eco-friendly financial solutions such as with our award-winning Green Reno Loan."

“For over 52 years we have existed to serve our Members and the communities we call home. We understand that thriving communities of the future will need strong healthy ecosystems and energy-efficient homes, and this product brings to life our desire to make sustainable choices easier for our Members,” he said.

 

[1] Australian Bureau of Statistics (ABS) Monthly Consumer Price Index October 2023

[2] Australian Bureau of Statistics (ABS) Energy Account, Australia 2021-22 Financial Year.