Homebuyers across Europe could soon access better borrowing rates for purchasing energy efficient homes or committing to retrofitting, thanks to a new partnership between banks, property valuers, energy efficiency companies and utility providers.

The European Energy Efficiency Mortgage initiative aims to create a standardised energy efficiency mortgage that will provide discounted interest rates for purchase and/or additional funds to retrofit homes. It has been led by the European Mortgage Federation – European Covered Bond Council, with partners including RICS, the European Regional Network of Green Building Councils, energy provider E.ON, Ca’Foscari University of Venice and SAFE Goethe University Frankfurt.

The aim of the initiative is to get concrete evidence on the link between energy efficient investment and default risk in the EU context. Things look promising, as research out of the US shows borrowers financing energy efficient homes have a 32 per cent decreased risk of defaulting on their loan, thanks in part to lower ongoing energy costs. This means loans represent a lower risk to banks, and could therefore provide an argument for reduced interest rates, if the same can be shown to be true in the EU.

“We have the responsibility to design a sustainable environment for future generations by developing a pan-European mortgage financing mechanism, according to which energy efficiency investments are made more accessible and affordable for consumers and institutional investors, and the subsequent energy efficiency improvements reduce risk for banks, creating a win-win for all involved,” EMF-ECBC secretary general Luca Bertalot said.

World Green Building Council Europe regional director James Drinkwater said innovative financing mechanisms were needed if the Paris Agreement of keeping global warming within 2°C was to be met.

“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,” he said.