Green mortgages: what they are, how they work in Spain and why they are called to revolutionize the market

Autor:@Ana P. Alarcos
Fuente: www.idealista.com​

Much has been said in recent times about green mortgages, home equity loans that have the sole purpose of rewarding the purchase of efficient homes or reforms that seek to reduce the consumption of old apartments.

At the moment, green mortgages are taking their first steps in the domestic market, as in Europe, waiting for community criteria to be defined that allow them to take off. Although they are still being sold on a residual basis, experts believe that in the coming years they will be the order of the day in the mortgage market.

To clear up doubts, we summarize who these mortgage products are aimed at, what entities are already offering them, how they differ from traditional loans and what has to happen to be generalized.

First of all, be clear about what a green mortgage is and in what cases you can hire. And the answer is that it serves to finance the acquisition of a property that has an energy rating A or B (the two highest possible steps), or the rehabilitation of an old house, provided that its energy efficiency is improved by 30% . That is what the European Commission considers a verde green housing ’.

​The offers of the banks
And what kind of entities are marketing it? In the case of Spain, entities such as Triodos Bank, Banco Santander, Bankia, BBVA, Caja Rural de Navarra, Cajamar and Unión de Crédito Inmobiliarios (UCI) stand out. All of them apply somewhat lower interests than in standard mortgages. That is, they reward the customer with a discount on the interest rate and in some cases the personal contribution required by banks to approve the loan is reduced.

The Dutch Triodos Bank, for example, has already granted almost 1,700 mortgages of this type in our country (among all the European countries in which it operates it has closed almost 12,000 operations) and links the interest rate charged to the customer to the energy rating of your home Its offer includes variable or mixed type loans and in the case of variable mortgages the differential improves by more than two tenths between a house A and a G.

In economic terms, it represents a reduction of about 16 euros per month and about 4,000 euros throughout the life of the variable loan. In the case of mixed products (where the first years apply a fixed rate and then a variable one), the savings are around 20 euros per month and 5,000 euros in total terms.

Santander, on the other hand, subsidizes the interest rate for the purchase of sustainable housing, according to the certificates recognized by the market, compared to a traditional mortgage by 10 basis points (that is, 0.1%). The ‘standard’ offer of the entity chaired by Ana Botín is 0.99% Euribor in the case of a variable loan and 1.9% at a fixed rate. In addition, it has launched a loan to finance energy rehabilitations of between 3,000 and 100,000 euros, with the collaboration of the European Investment Bank (EIB).

Bankia also has a specific credit line open to finance the purchase of sustainable homes. Where appropriate, mortgages have a bonus of 25 basis points (0.25%) compared to regular loans, while Cajamar applies a reduction of 5 basis points (0.05%) in the initial interest and in the differential of its variable mortgage 'Wefferent', focused on young clientele and digital profile, and is available for home purchase, rehabilitation or construction.

BBVA, on the other hand, has a promoter loan line for the construction of high-energy-efficient homes that allows buyers to finance the house with a bonus on the mortgage differential through subrogation. In the case of UCI, the offer is based on a bonus of 10 basis points for the differential and requires a lower contribution from the client for the purchase of housing, taking into account its level of risk and demanding at least 10% of the purchase price.

However, experts believe that the moment bonuses are very scarce. “Here the banks have been uncreative, and usually all they offer is a reduction in the interest rate. They should think of other incentives, such as taking out specific mortgage products for energy rehabilitation, which will surely help people focus reforms in this regard, ”says Juan Villén, head of idealist / mortgages, who insists that“ although each time More banks offer these mortgage products, they should be more visible. Almost all new construction promotions are already A-B certified, so banks should advertise green mortgages for all these homes. ”

The process, in an incipient moment

And if they are such good loans, why haven't they settled yet? As explained by Enrique Benavides, manager of the Spanish Mortgage Association (AHE), "the practical development of these types of mortgages is still incipient in Europe because there are several aspects that qualify to be a commercially mature product."

“There are still many aspects that are being debated and that must be clarified and agreed upon, such as the suitability of current energy efficiency certificates, the homogeneous classification of buildings; incentives and / or levies to encourage intervening parties (from promoters to citizens, through financial entities), the transition to energy efficiency objectives, the appraised value of a green property against a non-green one, or the measurement of the impact of improvements in housing efficiency, ”says Benavides.

Something similar believes Javier Kindelan, spokesman for RICS, vice president of CBRE Spain and president of Valuation Advisory Services CBRE EMEA, who states that “we are in an incipient phase where the pillars of sustainable financing are being established. As a result, according to the report published by the World Resource Institute, only half of the 50 largest banks in the world currently have sustainable economic goals and offer sustainable loans. ”

On the other hand, Cátia de Almeida, responsible for the green mortgage project of the Union of Real Estate Credits (UCI), argues that “at European level, there are several proposals to define the guidelines and the standardization of green mortgages”, such as the plans for action initiated by countries such as Italy, Belgium, Germany or Denmark.

In the case of Spain, Almeida highlights that in recent years there has been a more latent concern about how housing affects climate change and how users can take actions to prevent households from continuing to produce CO2 emissions in an excessive manner ( housing is responsible for more than one third of the emissions). In spite of this, “subsidy plans or economic incentives have not yet been developed in a structured and coordinated manner so that customers can take improvement measures without being financially affected. And this is where private entities have a fundamental role in creating that link between the client and the development of sustainable housing, ”he insists.

A 'forced' impulse that comes from Europe

And if they are still in such an incipient moment, why does the market assume that they will generalize in the coming years? The answer is that they will be driven by the sustainability objectives set by the European Union in the Strategic Energy and Climate Framework, based on achieving zero carbon emissions in 2050 and that include a specific strategy for renovating the residential park (ERESEE in the case of Spain). Among the proposed measures is that buildings have almost zero energy consumption, so regulations and actions aimed at reducing emissions will have to be implemented.

In the mortgage context, an initiative called Energy Efficient Mortgages (EEM) has also been created, which aims to promote and finance investment in energy efficient buildings and in renewed energy in order to guarantee a greener and sustainable future. The initiative is backed by some of the largest private banks in the Old Continent and the market assumes that it will be a reef for green loans.

The head of idealist / mortgages recalls that "the future is efficient homes and these mortgages go hand in hand", while the manager of the AHE argues that "energy efficiency and decarbonization that has marked Europe affect all areas of life, and all economic agents must be part of the solution, including financial institutions. ”

Pedro Garrido Chamorro, General Director of Registries and Notaries, believes that "green financing should be one of our immediate concerns, both for the need to create new products and for promoting sustainability."

For Kindelan, the great catapult of mortgages will be “the commitment of our country to the climate and the environment, as well as the need to raise awareness and strengthen the competitiveness of banks in innovation and commitment to sustainable financial products, which demonstrate a greater commitment to the environment ”. And he adds that green mortgages "promote more sustainable construction and reform, reducing energy demand, which in turn reduces real estate risks by providing assets with a better and longer useful life due to their most optimal state, competitiveness and liquidity."

Finally, the head of green mortgages at UCI adds that the pull of these loans will also be linked to the evolution of the market itself. “The banks have already detected demand from their customers, and this trend begins to penetrate among the promoters, which offer more and more efficient developments, maximum level and efficient use of resources. Green mortgages have come to stay because the future will either be sustainable or it won't be. ”

In Spain, in addition, its route is very wide. According to idealist / data, most of the homes for sale and rent that are currently available in the market have a medium-low level of sustainability. Specifically, the most common energy certificate is E (the fifth worst level on a scale of seven). On the other hand, from the General Directorate of Architecture, Housing and Land under the Ministry of Development argue that more than 60% of the domestic housing stock was built when there were no efficiency regulations.

In Europe the scenario does not improve much more: the European Mortgage Federation estimates that in the EU there are more than 220 million blocks of flats built before 2001 and there are millions of homes with an energy certification below C.

And this low level of sustainability has a direct impact on energy consumption and, therefore, on the pocket of citizens. According to a study carried out by the Energy Efficient Mortgages initiative in Denmark, a housing of A rating spends six times less energy than one of G rating (the lowest in the ranking), which means an annual saving of more than 3,500 euros and confers around 64,000 euros extra market value.