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Australia’s new lowest rate green construction loan

Australia’s new lowest rate green construction loan

Budding home renovators and builders of Australia rejoice. Online lender, loans.com.au, has today reduced interest rates on energy-efficient ‘green’ homes to 2.08 per cent. This is now the lowest rate on a green construction loan in the market.

This rate is available for owner-occupier construction loans for the first five years where the home has a NatHERS energy rating of at least 7 stars

loans.com.au loansAdvertised RateComparison RateRate Reduction
Green Construction2.08%2.39%Up to 1.59%
Green Home Loan2.08%2.36%0.40%
Green Construction Investor2.59%2.90%Up to 1.18%

RateCity research found that the average variable, owner-occupier construction loan rate on its database sits at 3.26 per cent (paying principal and interest). This new rate of 2.08 per cent is 1.18 percentage points lower. And when you compare monthly repayments on an average 30-year $400,000 home loan, those paying a rate of 2.08 per cent come out $248 ahead.

Repayments on a $400k, 30-year mortgage

Home loanLoan rateMonthly repayments
Green Construction2.08%$1,495
Average construction loan3.26%$1,743
Difference1.18%$248

Note: Figures based on hypothetical 30-year, $400,000 home loan. Does not factor in fees or rate changes. Data accurate as of 12.06.2021.

The news comes in good time as a recent RateCity survey found that of those forgoing travels this year due to COVID-19 restrictions, 16.2 per cent of respondents were directing funds into items from the home and 15 per cent were spending on home renovations instead. Spend on the home was the second highest response after ‘into savings’ (60 per cent).

In the first half of 2021, the value of home renovations approved each month passed the $1 billion mark in February, according to a Sydney Morning Herald article reporting on ABS data. This then ballooned to $1.14 billion in March – almost doubling in value compared to March 2019 (average monthly value of $680 million).

The move today from loans.com.au may offer these renovators some financial relief thanks to the record-low interest rate being offered. As property prices continue to climb across the country, those hoping to instead build the eco-friendly home of their dreams may comparatively save more on their mortgage repayments.

Managing Director, Marie Mortimer, said: “Green is the future of lending, and customers will benefit from making environmentally conscious financial decisions”.

Our green construction loan and green home loan will save Australian families thousands of dollars and reward them for choosing to build or buy a more environmentally friendly energy-efficient home.

“We’ve seen a shift in recent years - now consumers are looking for more sustainable options, and that extends to their finance. We’ve been proactive in creating products which meet the needs of the future and ensuring our lending leads the way on sustainability,” she said.

“Borrowers simply need to show us the home’s 7-star NatHERS rating from an accredited assessor, which is typically always included in the building plan for all new buildings, and the application will go through our usual approval process.”

Today loans.com.au also cut rates for owner-occupied home loans by 0.4 per cent to 2.08 per cent for newly built homes less than 12 months old with at least a 7-star NatHERS rating.

If you’re considering a construction loan and hoping to qualify for this new offering from loans.com.au, it may be worth discussing with your builders about how they can meet the NatHERS requirements.

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This article was reviewed by Personal Finance Editor Georgia Brown before it was published as part of RateCity's Fact Check process.

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