The Bank of England has published a staff working paper on product innovation in the UK mortgage market, using green mortgages as the case study. The research finds that Energy Performance Certificates became pricing-relevant in 2018, when lenders started offering lower mortgage pricing for more energy-efficient properties, and that these discounts widened over time, reaching up to 15 basis points in 2022 in offer-level data. The paper develops a framework that treats mortgage products as bundles of attributes and infers innovation from changes in the pricing mix of interest rates and fees. Using transaction-level data matched to Energy Performance Certificates and offer-level data on advertised green products, it finds measurable discounts for loans secured on properties with higher energy efficiency. Mortgages against high-EPC properties are concentrated in new buildings, which the paper says points to looser credit constraints for those borrowers and potentially higher housing investment, with implications for broader economic activity.
Bank of England2026-01-16
Bank of England staff paper finds green mortgage discounts emerged in 2018 and reached up to 15 basis points in 2022
The Bank of England has published research finding that green mortgage pricing emerged in the UK in 2018, when lenders began offering discounts for loans on more energy-efficient properties. Using transaction and offer-level data, the paper estimates discounts that rose to as much as 15 basis points in 2022. It also finds these mortgages are concentrated in new-build properties, suggesting an effect on housing investment.