Nationwide offers mortgage holders 0% loans to make their homes greener

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

Britain’s largest building society is offering the loan to its mortgage customers as an incentive to improve the green credentials of their homes.

The loan must be used to finance energy efficient home improvements such as solar panels, air source heat pumps, 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 cannot be used for anything that involves structural changes to the house.

Mortgage holders nationwide will be able to borrow between £5,000 and £20,000.

The loan is secured against your home and, combined with a person’s mortgage, should total no more than 90 percent of the value of your home.

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

Like a mortgage, the loan is offered for a fixed term of two or five years.

The 0 percent interest rate will end when the fixed period of the agreement ends. Any outstanding amounts will automatically roll over to Nationwide’s standard variable rate (SVR) of 7.74 per cent.

The green 0 per cent additional borrowing loan is available through Nationwide mortgage advisors and brokers.

Should you borrow to make your home greener?

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

However, acceptance has been very low: only 1,900 applications were completed by the end of September 2024.

Mortgage expert: Mark Harris, CEO of broker SPF Private Clients

Nationwide hopes the higher loan limit will attract more customers to consider it.

At the same time, Nationwide is waiving the requirement that new customers wait six months before being eligible to apply.

However, Mark Harris, chief executive of mortgage broker SPF Private Clients, does not expect the low take-up to change any time soon.

“Unless energy efficiency is a primary motivation for the borrower, we’re not seeing much customer uptake in the residential space,” Harris says.

“It seems like there’s a lot of talk right now, but not a lot of action being taken.”

“Owners, on the other hand, have an incentive to make green improvements as they must achieve an EPC rating of C by 2030.”

What to take into account

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

After the first two or five-year period has passed, the borrower’s homeowner will begin paying interest if they are unable to pay off the balance, although they also have the option of refinancing the loan elsewhere.

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

Mortgage expert: David Hollingworth, associate director at broker L&C Mortgages

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

For example, installing 270mm of insulation in an uninsulated loft is likely to save around £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 house is likely to save around £240 a year on energy bills.

Harris adds: ‘Although initially interest-free, you are taking on thousands of pounds of debt to save hundreds of pounds a year.

‘With the high cost of living, borrowers may be prioritizing their spending on other items, such as higher food and mortgage costs.

What other lenders offer green loans?

Lenders are increasingly offering green products, whether through add-on loans, such as with Nationwide, or cash rebates, such as Halifax’s recent green home improvement scheme.

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

“In addition, some lenders, such as Leeds Building Society, are offering greater affordability for energy efficient properties.”

This means that someone can borrow a little more than usual 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 purchasing more efficient homes (typically EPC A or B), which can often mean there is a big focus on new builds.

“Those deals may offer a slightly lower rate, a reduced fee, or cash back, so they provide a bit of a bonus.”