Does Energy Efficiency Predict Mortgage Performance?

19 Pages Posted: 6 Feb 2020

See all articles by Benjamin Guin

Benjamin Guin

Bank of England

Perttu Korhonen

Qatar Financial Centre Regulatory Authority

Date Written: January 31, 2020

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.

Keywords: credit risk, energy efficiency, green mortgages

JEL Classification: G21, Q40

Suggested Citation

Guin, Benjamin and Korhonen, Perttu, Does Energy Efficiency Predict Mortgage Performance? (January 31, 2020). Bank of England Working Paper No. 852 (2020). Available at SSRN: https://ssrn.com/abstract=3532373 or http://dx.doi.org/10.2139/ssrn.3532373

Benjamin Guin (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Perttu Korhonen

Qatar Financial Centre Regulatory Authority ( email )

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