Green mortgages are a concept devised to encourage and reward homeowners for buying and investing in energy-efficient homes.
This could be through offering lower interest rates or higher levels of borrowing, the rationale being that if customers have lower bills, they are less likely to default on a mortgage payment.
As Hospodářské noviny reports, if the property meets environmental requirements, the applicant could obtain a cheaper loan. This trend of so-called green banking is already evident in industrial halls or warehouses.
In the middle of the year, Komerční banka will likely start to offer a green mortgage, while Raiffeisenbank and Moneta Money Bank, are also preparing preferential financing for sustainable housing and green projects. ČSOB already provides green loans.
Householders must purchase new homes that are very energy efficient and low emission and they must meet sustainability requirements “above and beyond” current new housing market standards to be able to benefit from the green mortgage.
The reasoning behind promoting green mortgages is that owners of energy-efficient homes might be less likely to default on their payments.
Since energy efficiency lowers energy use, energy-efficient homes should have lower bills. This might make the homeowners less likely to default on their mortgage payments because their disposable income will be larger.
Although the concept of green mortgages is no longer a novelty, it is still too early to predict just how they will work. We are at a very early stage, and the basic architecture of sustainable finance is still being worked out.
At the end of 2019, just 25 of the world’s 50 largest banks had sustainable finance targets or a green lending option in place, according to a report published by the World Resource Institute.