Nationwide presents mortgage holders 0% loans to make their houses extra eco pleasant

Nationwide customers can now secure interest-free loans up to £20,000 to make their homes more energy efficient.

Britain’s biggest building society is offering the loan to its mortgage customers as an incentive to improve their home’s eco credentials.

The loan must be used to fund energy-efficient home improvements, such as solar panels, air source heat pump, window upgrades, boiler upgrades, cavity wall insulation, loft insulation or an electric car charging point. 

Homeowners are free to use any local or national contractor or supplier for the work. However, it can’t be used for anything that would make structural changes to the home.  

Nationwide mortgage holders will be able to borrow between £5,000 and £20,000. 

The loan is secured on their home, and the loan combined with a person’s mortgage must add up to no more than 90 per cent of their home’s value.

It says its customers can now apply for the green borrowing option as long as they have made at least one mortgage payment. 

Similar to a mortgage, the loan is offered on either a two or five-year fixed term. 

The 0 per cent interest rate will stop when the fixed deal period ends. Any outstanding amount will automatically move onto Nationwide’s standard variable rate (SVR) of 7.74 per cent. 

The 0 per cent green additional borrowing loan is available via Nationwide’s mortgage advisers, as well as brokers. 

Should you borrow to make your home greener? 

Nationwide was the first major lender to offer green borrowing at 0 per cent in June 2023. It came with a maximum loan limit of £15,000. 

However, take-up has been very low, with just 1,900 applications completed by the end of September 2024.

Nationwide is hoping the bigger loan limit will entice more customers to consider it.

At the same time, Nationwide is removing a requirement for new customers to wait six months before becoming eligible to apply.    

Mark Harris, chief executive of mortgage broker SPF Private Clients doesn’t expect the low uptake to change anytime soon, however.

‘Unless energy efficiency is of prime motivation for the borrower, we are not seeing much uptake from clients in the residential space,’ says Harris.

‘There seems to be a lot of talk at the moment but not a great deal of action.’

‘Landlords, on the other hand, do have an incentive to make green improvements as they must achieve an EPC rating of C by 2030.’

What to watch out for 

It’s easy to see an interest-free loan as a form of free money. But, just like any other loan, it will need to be paid back. 

Once the first two or five year period is up, the borrower homeowner will start paying interest if they aren’t able to clear the balance – though they also have the option to refinance the loan elsewhere. 

David Hollingworth, associate director at L&C Mortgages says: ‘Once the initial deal period ends it will revert to a standard variable rate as with any other deal, but the borrower can shop around at that time.’

Homeowners who invest in green improvements will also be hoping tp see the benefit when it comes to their energy bills.

For example, installing 270mm of insulation to an uninsulated loft is likely to save about £230 a year on energy bills for the average homeowner, according to the Energy Saving Trust.

Meanwhile, installing cavity wall insulation in a typical semi-detached home is likely to save about £240 a year on energy bills.

Harris adds: ‘While it is interest-free initially, a debt of thousands of pounds is being taken to save hundreds of pounds a year. 

‘With the high cost of living, it may be that borrowers are prioritising their expenditure elsewhere on higher food and mortgage costs, for example.

What other lenders offer green loans?

Lenders are increasingly supplying green products, either via additional loans, such as with Nationwide, or cashback, like Halifax’s recent Green Home improvement scheme.

Harris says: ‘With Halifax, homeowners can claim up to £2,000 cash back if they have made improvements to make their home more energy efficient. 

‘Also some lenders, such as Leeds Building Society, are offering enhanced affordability for energy efficient properties.’

This means that someone may be able to borrow slightly more than normal based on their income, if they can prove that their energy bills will be lower than average.  

David Hollingworth adds: ‘Many green products will already offer incentives to those that are buying more efficient homes (typically EPC A or B), which can often mean that there’s a big focus on new build. 

‘Those deals may offer a slightly lower rate, a reduced fee or a cashback so gives a small bonus.’