Nationwide offers mortgage holders 0% loans to make their homes more environmentally friendly

Customers from across the country 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 environmental features of their homes.

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

Homeowners are free to call on a local or national contractor or supplier for the work. However, it cannot be used for anything that would cause structural changes to the home.

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

The loan is secured by the home and the loan in combination with the mortgage may not exceed 90 percent of the value of the home.

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

Just like a mortgage, the loan is offered with a fixed term of two or five years.

The 0 percent interest stops as soon as the fixed deal period ends. Any outstanding amount will automatically be transferred to Nationwide’s standard variable rate (SVR) of 7.74 percent.

The 0 percent green additional loan is available through Nationwide’s mortgage advisors, but also through brokers.

Should you borrow to make your home greener?

Nationwide was the first major lender to offer green loans at 0 percent in June 2023. There was a maximum borrowing limit of £15,000.

However, take-up was very low: by the end of September 2024, only 1,900 applications had been submitted.

Nationwide hopes the increased borrowing limit will entice more customers to consider it.

At the same time, Nationwide is removing the requirement that new customers must wait six months before they are eligible to apply.

However, Mark Harris, CEO of mortgage broker SPF Private Clients, does not expect the low acceptance rate to change any time soon.

“Unless energy efficiency is the primary motivation for the borrower, we don’t see much customer adoption in the residential space,” Harris says.

“There seems to be a lot of talk at the moment, but not a lot of action.”

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

What to pay attention to

It’s easy to think of an interest-free loan as a form of free money. But like any other loan, it must be repaid.

Once the initial two- or five-year period is over, the borrower’s homeowner will start paying interest if he cannot settle the balance, although he also has the option to refinance the loan elsewhere.

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

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

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

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

Harris added: ‘Although initially interest free, thousands of pounds of debt is taken on to save hundreds of pounds a year.

‘With the high cost of living, borrowers may prioritize their spending elsewhere, for example on higher food and mortgage costs.

Which other lenders offer green loans?

Lenders are increasingly providing green products, either through additional loans, such as with Nationwide, or through cashback, such as Halifax’s recent Green Home improvement program.

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

‘Also, some lenders, such as Leeds Building Society, are offering improved 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 demonstrate that their energy bill will be lower than average.

David Hollingworth adds: ‘Many green products already offer incentives for those buying more efficient homes (typically EPC A or B), which can often mean a strong focus on new builds.

‘These deals may offer a slightly lower rate, a lower fee or cashback, so it gives a little bonus.’