Cheaper mortgages for energy-efficient homeowners in Brixton and Battersea

News at Eden Harper | 05/10/2016

The European Energy Efficiency Mortgage initiative, launched by a consortium led by the European Mortgage Federation and European Covered Bond Council, aims to create a standardised “energy efficient mortgage” based on preferential interest rates for energy-efficient homes and additional funds for making properties more energy efficient at the time of purchase.

The project represents the first time a group of major banks and mortgage lenders, as well as businesses and organisations from the building and energy industries, have come together to address the concept of energy-efficient mortgages.

Project partners include the Royal Institution of Chartered Surveyors and energy giant E.On.

The initiative will explore the link between energy efficiency and borrower’s reduced probability of default and the increase in value of energy efficient properties.

For banks and investors, this could lead to loans that represent a lower risk on the balance sheet.

It could also ensure that banks are able to recognise “energy efficient” assets in their risk profiling, which would begin to help the market to price-in the added value of energy efficient property.

Luca Bertalot, EMF-ECBC secretary general, said: “We have the responsibility to design a sustainable environment for future generations by developing a pan-European mortgage financing mechanism.”

James Drinkwater, Europe regional director at the World Green Building Council, added: “The Paris Agreement of December 2015 has set a course to keeping global warming to within 2C, but we will need to develop innovative ways of financing energy efficiency in Europe’s homes if we are to stand any chance of meeting that goal.

"Mortgages that reward consumers and investors by recognising energy efficiency represent one such way, and will undoubtedly play a key role in helping to achieve our ambitious climate change targets."

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City AM