Sustainable finance
Green Mortgage
Definition
A green mortgage is a mortgage targeted at green buildings, under which a bank or lender offers a house buyer preferential terms — such as a lower interest rate or an increased loan amount — if the property meets certain environmental standards, whether a rated new build or an existing home the borrower commits to renovating to higher environmental performance.
References
definition and mechanics
Overview
What it means
The lender's logic is risk: efficient homes cost less to run, lowering default probability, and may hold value better against a future "brown discount". The borrower's logic is cost: preferential terms reward buying or making an efficient home. Initiatives such as the European Energy Efficient Mortgage Action Plan (EeMAP) have worked to standardise definitions and prove the risk case.
How it is used
Retail banks offer green mortgage products tied to energy-performance certificates; regulators examine preferential capital treatment; and the product links building renovation to household finance at scale.
Why it matters
Most of the 2050 building stock already exists; green mortgages are among the few retail-finance levers that can fund its renovation. **Note:** 1267 Green home loan merges into this entry as the same retail product.