Only 28% of consumers aware of options available
Green home loans and their benefits remain a blind spot among Australian consumers, with a recent poll conducted by customer-owned Gateway Bank showing just 28% of respondents were aware they even exist.
While that is an improvement from 23% two years ago, it serves as a reminder that borrowers aren’t fully aware of the gamut of options at their disposal.
Furthermore, the research shows that three quarters of borrowers would not approach a broker to secure a green home loan. Considering the fact that 76% of all home loans are now originated by brokers, there is a clear discrepancy at play.
Rather than a broker-specific knowledge gap, Gateway Bank’s chief operating officer Zeb Drummond (pictured) believes there is “a broader lack of awareness” around green home loans across both the consumer base and the broker market.
Drummond believes this is mainly due to so few lenders having a green lending offering. The bank actively encourages brokers to engage with the lenders that do offer them in order to understand the relevant certification bodies and qualification requirements.
“This can be a confusing and complex proposition for borrowers, so we recommend brokers reaching out to the green lenders to really understand the criteria and benefits,” said Drummond.
Despite the relative lack of green home loan awareness, Gateway Bank’s research shows that 81% of buyers view sustainable property features as either “critical” or “important” when making homeownership decisions.
The challenge now is to make sure there are appropriate finance options that align with the sentiment.
Different strokes
Asked why consumers are reluctant to approach brokers to discuss green home loans, Drummond suggested that “the low levels of awareness amongst consumers for green home loans means they don’t really position green loans and home loans together in their purchase decision”.
“In the consumers’ mind they go to their broker for a home loan, while a green home loan is something different,” he said. “The feedback from consumers is that green home loans can only be found by approaching the lender which is a misconception that we need to shift.”
Drummond suggested that the biggest misconceptions concerning green home loans “are around their availability and that they’re only found by approaching a lender directly”.
While consumers rightly believe that green home loans offer a discounted rate, they don’t often know what enables them to qualify for the discount, he added.
Consumers also work on the misconception that the Big Four banks – ANZ, NAB, Westpac and CommBank – are the primary providers of green home loans.
“This misconception means that smaller lenders who are specialising in green lending are being overlooked or not considered by consumers which is why it is so important for brokers to understand this category,” said Drummond.
Indeed, alongside Gateway Bank, non-majors like Bank Australia and FirstMac are among the few lenders with sizeable green home loan offerings on the market.
A gap in the market
Drummond’s comments follow a new report released alongside the launch of the Green Building Council of Australia (GBCA)’s Green Star apartments sustainability rating.
This new rating independently verifies each apartment within a certified building with the aim of helping buyers, renters and financiers make more informed decisions.
“With housing affordability at crisis levels, our cities growing denser, and climate pressures intensifying, the demand for apartments must be met with cost-effective and sustainable solutions,” said GBCA chief executive Davina Rooney.
Gateway has committed to accepting the GBCA’s Green Star Buildings - Apartments Pathway certification under its green home loan eligibility criteria.
“Despite a growing list of lenders offering green loans for free-standing homes, the glaring absence of financial products for sustainable apartment loans reveals a market gap ready to be filled,” said the bank.
Financial benefits
Gateway Bank’s research determined that, while Green Star apartments have a slightly higher build cost, “this initial investment is far outweighed by long-term financial benefits”.
The bank estimated that a Green Star apartment in Sydney could cost around $11,700 more to build, but the combination of lower interest repayments, energy savings and additional price appreciation on the value of the property could save up to $111,000 over 30 years.
“With homebuyers increasingly looking for sustainable features in their homes, the demand for green lending solutions will only continue to increase,” said Gateway Bank chief executive Lexi Airey.
“The offer of more comfortable living, reduced impact on the environment and significant financial benefits provide a compelling proposition,” she added.
At the time of writing, there were 142 apartment projects registered under the Green Star Buildings rating tool, representing around 27,500 individual apartments that are eligible to use the Green Star apartments pathway.
“With three quarters of respondents saying at this point that they wouldn’t approach a broker to source a green home loan, this is undoubtedly an opportunity for mortgage brokers to include green home loans in their portfolio/offer and capture this growing market,” said Airey.
