A word from Gateway Bank
Gateway Bank is a customer-owned bank with its head office in Sydney, which has been serving members for over 70 years. Today, Gateway supports over 30,000 members and offers a range of award-winning products from transactional banking, savings accounts, home loans, commercial lending, and consumer loans. As part of Gateway’s ‘Pocket & Planet’ purpose, the bank has been a leader in green lending, offering a wide range of innovative, award-winning discounted Green Home loans, Green Commercial loans, EV loans, and Eco Personal loans.
Green lending remains a niche segment of the market, but as more borrowers factor energy-efficient and eco-friendly upgrades into property decisions, demand continues to grow.
Research published last year by PropTrack, REA Group’s market insights arm, found that Australian home owners intend to spend an average of $7,950 each on energy-efficient home upgrades over the next five years.
In this context, sustainability is less a buzzword and more a practical way for borrowers to reduce both their mortgage repayments and energy bills.
And that creates an opportunity for brokers.
Zeb Drummond, chief operating officer at Gateway Bank, one of Australia’s leading green loan financiers, says borrowers are becoming increasingly familiar with the benefits.
“People are factoring it in more into their buying decisions. And I think that that’s quite exciting for us. I think in some of the fringe demographics as well, it becomes perhaps a little bit more prominent, even still, as far as where it ranks in the buying decision,” he says.
“People in some slightly older demographics are also passionate and motivated to factor it into buying decisions. Similarly, I think as the next wave of borrowers come into that life stage when it’s time to consider home purchase, we’ll see an increase in that as well.”
For Drummond, the additional requirements of green loans create a gap that can be effectively filled by brokers who understand how these products work.
“The importance of a broker is to provide value and options. And there are a number of options broader than just interest rate and that has to encompass the drivers of the customer as well, and what they hold as important at the same time as interest rates,” he says.
“I think for a broker to have a more holistic conversation with a customer about green and eco, if that’s important to them, will probably solidify a very strong relationship between customer and broker, because there’s a greater understanding of the driver for the customer.
“You demonstrate that understanding and value as a broker, and that will resonate with your customer and probably win you a customer for much, much longer.”
How green loans
Green home loans are designed to incentivise sustainable choices by offering lower interest rates for borrowers who purchase or refinance a property that meets sustainability benchmarks, such as a minimum Nationwide House Energy Rating Scheme (NatHERS) rating.
Gateway Bank, for instance, currently offers two green home loan products for owner-occupier borrowers – its Green Home Loan and Green Plus Home Loan.
The Green Home Loan provides qualifying borrowers a discount of at least 0.15 per cent per annum if they can show they have made their home more environmentally friendly, with eligible properties required to have a minimum four-star and maximum 6.9-star rating or include at least three recognised environmental or energy-efficient features.
By comparison, Gateway Bank’s Green Plus Home Loan offers a discount of at least 0.25 per cent per annum, but borrowers must meet higher sustainability standards, such as a seven-star or higher NatHERS rating, a seven-star Residential Efficiency Scorecard, or a Green Star designed or Certified home from the Green Building Council of Australia (GBCA).
Gateway Bank also offers a similar Green Home Loan product targeting investors and, like many other lenders, green loans to fund sustainable upgrades that improve an existing property’s energy efficiency through additions such as solar panels.
Marisa Hoffenberg, founder and mortgage broker at brokerage Sustainable Home Loans, says incentives can be attractive to borrowers who wish to lead more sustainable lives.
“Politically, there hasn’t been as much of a favourable environment,” she says.
“In saying that, the underlying demand and trend towards greater sustainability is there.”
While the opportunity to secure a better rate is one drawcard, Drummond says brokers shouldn’t underestimate the value of a loan that helps clients save on their power bill.
“Energy costs are not going anywhere where you’d like them to soon,” he adds.
“This is a growing niche that I think brokers need to be aware of all the options and how they can underpin their clients’ needs, both immediately and into the future.”
What’s next
As the green lending market continues to mature, Drummond says it’s important for brokers to keep an eye on the space and be aware of the ways these loans are changing.
“There’s a lot more for everyone at an industry level to do in this space to raise awareness,” he says.
“I think, from a broker’s perspective, there’s more information that has to be absorbed and made more readily available to them. But there also needs to be a level of inquiry or questioning to the nature of what the offerings are that come into the market, because they will increase.”
Hoffenberg also encourages brokers to stay across market developments, understand lender eligibility criteria, and consider how they can position green loans to clients beyond simply highlighting the benefit of a lower interest rate.
“If you are in a more sustainable home, they are much more comfortable and cheaper to run and ‘ethically’ you are playing your part in protecting the environment,” she says.
“So, there are certainly benefits beyond cheaper interest rates.” However, Hoffenberg notes that while green loans have multiple advantages, they are not necessarily for everyone.
“There are more steps and you’ve got to understand all the energy efficient requirements and how to get them done. So, the broker and the client have to be willing to go that extra mile,” she says.
In terms of the immediate future, Drummond says he also expects green lending to evolve and mature in the coming years, providing a strong opportunity for brokers to position themselves as experts in this growing space.
“The way we are looking at green lending is that we’ve got a whole suite of offerings, and there will be the next iteration of green. So, it’s definitely not a set and forget, that’s what the market is now, and that’s what it’s going to be. I think it’s going to be under constant evolution,” he says.
“As a result of that, there’s going to be a need for constant information and constant education as well.”
