Tuesday 20 September 2016 2:19 pm

European initiative launched to push for energy efficient mortgages

A European initiative which wants energy efficient homeowners to be rewarded with cheaper mortgage rates was launched today.

The European Energy Efficiency Mortgage will explore the link between energy efficiency, a borrower’s reduced probability of default and the increase in value of energy efficient properties.

"For banks and investors, this could lead to loans which represent a lower risk on the balance sheet and could therefore qualify for a better capital treatment," it said.

Read more: Stamp duty changes should be linked to carbon emissions

"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 real estate."

The project will be led by the European Mortgage Federation – European Covered Bond Council (EMF-ECB) and its partners include the Royal Institution of Chartered Surveyors and energy giant E.On.

It marks 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 push for this product.

Read more: The Green Deal cost taxpayers £17,000 per household

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, said: “The Paris Agreement has set a course to keeping global warming to within two degrees, 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 which 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."