Going Green – The Growth in Green Mortgage Financing in Ireland

Derek Lambert, Paul Lyons and James Carroll
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Paul Lyons: Central Bank of Ireland
James Carroll: Central Bank of Ireland

No 4/FS/23, Financial Stability Notes from Central Bank of Ireland

Abstract: Green mortgages are a recent financial innovation, being established as a mainstream product in Ireland in 2019. By offering borrowers lower interest rates, green mortgages support wider emissions targets by incentivizing households and businesses to invest in energy efficiency. In this Note, we estimate the growth in green mortgage financing in Ireland and describe the characteristics of green mortgage borrowers and loans. We find that, despite their very recent introduction, green mortgages account for a sizable and growing share of mortgage lending, representing almost thirty per cent of originations in 2022. We also find that first time buyers (FTBs), those switching their mortgage, and borrowers in the Leinster region are the most likely cohorts to avail of green mortgages. Furthermore, green mortgage loan amounts are larger, are associated with higher value properties and are more prevalent in higher income groups, particularly for FTBs. This latter point suggests that there is a risk that the efficiency gap between high and low income groups could widen into the future. We also find evidence that some eligible borrowers have not availed of/received a green mortgage.

Date: 2023-05
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