Risk differentials between green and brown assets?
2022
Guin, Benjamin | Korhonen, Perttu | Moktan, Sidharth
We examine the relative riskiness of residential mortgages depending on the energy efficiency of the underlying property. Using a unique micro-level dataset in the UK, 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 to controlling for other relevant determinants of mortgage default including borrower income and loan-to-value (LTV). We conclude that the energy efficiency of a property is a relevant predictor of mortgage payment arrears. This result adds to the evidence base on risk differentials between green and brown assets.
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