Energy efficiency as a factor in the pricing and structuring of mortgage loan products for residential properties

Abstract

Mortgage loans in the European banking sector sum up to approximately one third of total assets. Thus, the condition of the financed building stock is a crucial risk factor for borrowers. Environmental policies try to boost private investments in order to decrease carbon related emissions and improve energy inefficient buildings, however convincing data and efficient measures are missing. Thorough explanations on the relationship between energy efficiency and credit risk should help to overcome investment barriers and open paths for more sustainable financing of the European building park.