0%? Now THAT'S a low interest rate
We’ve had plenty of discussion over the government’s requirements for energy efficiency in homes, but at least one lender seems to be embracing helping homeowners improve their homes.
Nationwide Building Society has raised the maximum borrowing limit on its Green Additional Borrowing product, allowing mortgage customers to apply for interest-free loans of up to £20,000. This building society says this initiative aims to encourage homeowners to undertake energy-efficient upgrades and retrofit their homes.
Eligible borrowers can now access loans from £5,000 to £20,000, subject to a 90% Loan-to-Value (LTV) cap, with repayment terms of either two or five years. Importantly, new mortgage customers can now apply for this green finance immediately after mortgage completion, as Nationwide has scrapped the previous six-month waiting period for eligibility.
Nationwide first introduced its 0% Green Additional Borrowing product in June 2023, with an initial borrowing cap of £15,000. However, uptake has been slower than expected, with only 1,900 successful applications processed by the end of September 2024. This low engagement has prompted changes to the product to make it more accessible and appealing.
New Report Advocates for Government Action on Retrofitting
The introduction of these product changes coincides with the release of Nationwide's new report, “How low-cost finance supports the greening of UK homes,” which stresses the need for better incentives to encourage home decarbonisation. The report highlights the challenge posed by the 28 million UK homes contributing roughly 15% of the nation's greenhouse gas emissions. With retrofitting viewed as a critical step in achieving the government’s 2050 net-zero target, the report outlines several recommendations to spur change.
Nationwide urges the government to introduce public awareness campaigns and increase incentives and support schemes to simplify the retrofit process. It also recommends establishing a National Retrofit Hub to guide homeowners through the entire process and fostering better collaboration between lenders, energy companies, and the government to align efforts.
Research Findings: Barriers to Retrofitting
Nationwide’s research provides insights from its customers, both those who have accessed green loans and those who have not. Key findings include:
- Government responsibility: Most respondents believe the government should take the lead in funding energy efficiency.
- Complex challenges: Financial support is only one of several obstacles to retrofitting, with many homeowners motivated by the potential for lower bills rather than environmental benefits.
- Early interest needed: The appeal of 0% financing mainly attracts those already planning energy-efficient improvements.
- Limited broker involvement: Most loan applications come directly through Nationwide, as brokers see little benefit from small-scale, low-cost lending.
The report highlights the need for better guidance for homeowners to find qualified tradespeople and increased awareness of well-known retrofit technologies.
Calls for Industry Collaboration
Nationwide is calling for more collaboration between lenders, energy companies, and the government to streamline retrofitting efforts and ensure homeowners have the support they need.
The building society also recommends incentivising banks to offer low-interest or interest-free loans to mortgage customers for green improvements.
Graham Lloyd, Nationwide’s Head of Strategy and Sustainability, emphasised the need for urgent action: “We believe the UK’s 2050 net-zero target can only be met through incentivising people to invest in their homes. As a mutual, we have chosen to make a difference, which is why we’re making it as easy and attractive as possible for our mortgage customers to retrofit their properties. But much more needs to be done and we need both the government and businesses to step in and step up to create meaningful progress. This cannot continue to be kicked down the road, as it has been for some years now.”
Product Details and Eligibility
The 0% Green Additional Borrowing product is available through both Nationwide mortgage advisers and brokers. Funds must be used for non-structural, energy-efficient improvements such as:
- Solar panels
- Heat pumps
- Energy-efficient windows
- Boiler upgrades
- Insulation (cavity wall or loft)
- Electric vehicle charging points
Borrowers can work with any contractor—local or national—for the upgrades.
Since its launch, the product has facilitated £21.1 million in lending, with an average loan size of £12,300. Despite these efforts, the 0% green loan represents only 8% of Nationwide’s total additional borrowing applications, underscoring the need for more robust incentives to boost uptake.
Nationwide remains committed to expanding its green finance options, encouraging homeowners to invest in sustainable upgrades, and working with policymakers to remove barriers to retrofitting.
