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Does energy efficiency predict mortgage performance?

Author

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  • Guin, Benjamin

    (Bank of England)

  • Korhonen, Perttu

    (Qatar Financial Centre Regulatory Authority)

Abstract

We examine a unique micro-level data set on residential mortgages in the United Kingdom. Our analyses suggest that mortgages against energy-efficient properties are less frequently in payment arrears than mortgages against energy-inefficient properties. This result is robust when controlling for other relevant determinants of mortgage default including borrower income and the loan to value ratio of the mortgage. We conclude that energy efficiency is a relevant predictor of mortgage defaults.

Suggested Citation

  • Guin, Benjamin & Korhonen, Perttu, 2020. "Does energy efficiency predict mortgage performance?," Bank of England working papers 852, Bank of England.
    • Handle: RePEc:boe:boeewp:0852
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    References listed on IDEAS

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    1. James Cloyne & Kilian Huber & Ethan Ilzetzki & Henrik Kleven, 2019. "The Effect of House Prices on Household Borrowing: A New Approach," American Economic Review, American Economic Association, vol. 109(6), pages 2104-2136, June.
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    7. Fuerst, Franz & Warren-Myers, Georgia, 2018. "Does voluntary disclosure create a green lemon problem? Energy-efficiency ratings and house prices," Energy Economics, Elsevier, vol. 74(C), pages 1-12.
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    Citations

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    Cited by:

    1. Andreas Breitenfellner & Susanne Hasenhüttl & Georg Lehmann & Andreas Tschulik, 2020. "Green finance – opportunities for the Austrian financial sector," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 40.
    2. Billio, Monica & Costola, Michele & Pelizzon, Loriana & Riedel, Max, 2022. "Creditworthiness and buildings' energy efficiency in the Italian mortgage market," SAFE Working Paper Series 352, Leibniz Institute for Financial Research SAFE.
    3. Giraudet, Louis-Gaëtan & Petronevich, Anna & Faucheux, Laurent, 2021. "Differentiated green loans," Energy Policy, Elsevier, vol. 149(C).

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    More about this item

    Keywords

    Credit risk; energy efficiency; green mortgages;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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