29 million homes in the UK produce around 16 per cent of the country’s total carbon emissions. The government has made a commitment to reduce that percentage to net zero by 2050; in accordance with that commitment, many schemes are being introduced. As of May 2023, 0 per cent interest loans are available in the UK for green home improvements and this is great news for homeowners and landlords alike. The Nationwide Building Society has announced that it will reduce the interest rate from its green home improvement mortgages to 0 per cent to support homeowners and mortgage members who are looking to improve the efficiency of their homes while being green-friendly.
Essentially, this 0 per cent interest green home improvement loan will be available from the first of June, 2023. Up to 5000 households with an existing Nationwide mortgage will be able to borrow anywhere between £5,000 to £15,000 which is to be used on green home improvements. This loan has been capped at a 90 per cent loan-to-value ratio with a two to five-year mortgage repayment term according to estate agents in Selby. Nationwide has come up with this approach to work towards the common goal of zero carbon emissions by retrofitting and redeveloping properties. This new zero-interest loan will be available via Nationwide’s brokers and mortgage advisors all through the UK.
The one strict criteria pertaining to this loan is that all the funds have to be used towards energy-efficient green home improvements which are non-structural in nature. For instance, the installation of solar panels, air source heat pumps, ground source heat pumps and small-scale wind turbines, boiler upgrades as well as window replacements and upgrades, are considered green home improvements. Additionally, loft insulation, pipe and boiler insulation, cavity wall insulation, upgrading existing utilities such as lighting, investing in rainwater harvesting, and even installing charging points for electric cars will be included under this mortgage.
So, how do these interest-free green home improvement loans work? At the moment, Nationwide has announced that existing mortgage customers can borrow an additional amount between £5,000 to £15,000 for energy-efficient non-structural home improvements. The loan, coupled with the existing mortgage, should not cross 90 per cent of the total value of the property. This mortgage can be taken out on a fixed-term lease of two years or five years during which no interest will be charged. If the loan period extends over and above two years or five years, then Nationwide will charge interest at the standard mortgage rate which is currently 7.74 per cent. For instance, if someone decides to borrow an additional £15,000 for 5 years using the 0 per cent Green Additional Borrowing mortgage, then he or she will just have to pay a monthly repayment of £250 without any interest. At the moment, Nationwide does have another green home improvement mortgage with a 3.89 per cent rate of interest. If a homeowner were to take that mortgage, and borrow £15,000 for a fixed term of 5 years with a 3.89 per cent rate of interest, then the homeowner would have to repay £275.5 every month. Using the 0 per cent Green Additional Borrowing, homeowners and landlords can save around £1,500 over the entire loan period. Only one zero per cent loan will be available per household and the loans are subject to availability and eligibility. These zero-interest green home improvement loans aim to understand whether homeowners and landlords will be willing to improve the energy efficiency of their homes if interest rates were not a problem.
This move from Nationwide has been welcomed by market experts, estate agents, brokers, homeowners and landlords alike. Many experts have come forward to say that this initiative by Nationwide is not only a good step forward but also that the move is very refreshing. Hopefully, this step will be the first step towards many other such loans considering this is a great step towards making homes greener and more energy efficient which is the need of the hour. Many market experts are estate agents home that other such banks and brokers will work towards making home improvement loans more affordable so that the UK can reach its commitment of zero net carbon emissions by 2050.