More banks join EU-backed pilot scheme for green mortgages

The World Green Building Council (WorldGBC) issued a new report calling on lenders, industry and government to grow a new mass market for energy efficient mortgages and make them available to every borrower on the continent. [Shutterstock]

Deutsche Hypothekenbank in Germany and the Ecology Building Society in the UK are the latest to join a group of 37 pioneering banks offering an energy efficiency mortgage pilot scheme to homeowners, in what supporters say could be “a game-changer” for the multi-billion mortgage industry.

By joining the scheme, the two banks will adopt standards which are currently being tested as part of an EU-backed pilot programme involving banks and financial institutions representing a combined lending power of over €3 trillion, equal to around 20% of the EU’s GDP.

The pilot scheme aims at trialling new criteria for energy efficiency mortgages for homebuyers. The proposed standards will provide lenders with the critical information they need to understand how energy use and efficiency improvements impact on mortgage risks.

Supporters of the initiative aim to demonstrate how easy it is to apply the proposed standards, saying it could transform the multi-billion-euro mortgage business by making green loans cheaper.

Buildings – whether residential or commercial – are responsible for 40% of the EU’s primary energy consumption and 36% of its CO2 emissions and are considered crucial in the fight against climate change.

But at the current renovation rate of only 1% annually, it would take a century to decarbonise the entire European building stock, according to projections by the European Commission, the EU executive.

“Europeans are well aware of the risks of not upgrading their old polluting cars, but we still lack accessible finance to help property owners upgrade their old polluting homes,” said James Drinkwater, Director of WorldGBC’s Europe network.

“Energy efficient mortgages offer a win-win for banks and borrowers here – lenders, industry and governments need to work together to ensure they reach millions of homeowners.”

EU finance advisors back ‘less risky’ energy efficiency loans

A high level group of financial experts has advised European regulators to encourage more favourable treatment for energy saving loans and mortgages, in a move that could unlock billions in lending for green building renovation programmes across Europe.

The announcement was made as policymakers and financial industry experts gather for the 9th Annual World Green Building Week, on 24-30 September – a week dedicated to progressing towards 100% net zero carbon buildings by 2050.

On this occasion, the World Green Building Council (WorldGBC) issued a new report calling on lenders, industry and government to grow a new mass market for energy efficient mortgages and make them available to every borrower on the continent.

“Millions of homeowners are missing out on cost savings, higher property values and more comfortable homes because of a lack of easy-to-access, affordable finance to invest in energy efficiency improvements. Energy efficient mortgages have the potential to be a game changer,” said Michael Lewis, UK CEO of E.ON, one of WorldGBC’s European partners.

WorldGBC’s latest report proposes new standards for green mortgages in three key areas:

  • Energy performance thresholds that need to be met.
  • Performance monitoring requirements to evidence that climate and financial risks are really being addressed.
  • Quality assurance requirements regarding renovation works.

WorldGBC’s Europe network is a partner in the EU-funded Energy Efficient Mortgages Initiative (EEMI), led by the European Mortgage Federation-European Covered Bond Council.

The initiative aims to create an energy efficient mortgage through which homebuyers are incentivised to improve the energy efficiency of their building or acquire an already energy efficient property by way of favourable financing conditions linked to the mortgage, such as lower interest rates or additional capital.

Homeowners offered cheaper mortgages in return for energy efficiency renovations

EXCLUSIVE / Homeowners will qualify for reduced repayment rates on their mortgages if they undertake energy efficiency renovations, and lower interest rates on loans to pay for them, under “pioneering” plans being drawn up by lenders for consideration by EU and global regulators.

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