Green mortgages on the rise - their high cost reflects the impending focus on sustainability
According to Asufin, the supply of green mortgages has doubled, but the cost of this growing benefit has been the increase in the price of their instalments, which shows that sustainability is at the top of the European agenda. Your luxury real estate agent Valencia helps you to analyse this phenomenon.
The rise of green mortgages and its unnoticed side-effects
It is very easy to hide a harm behind a disguised benefit, and this is what is happening with green mortgages for those looking to buy their first penthouse in Valencia. Green mortgage proposals have increased significantly since 2022 to date, and from five types of offers offered by just two financial institutions last year, we now have nine offers spread across six institutions.
Banco Santander has decided to redouble its commitment and offer the first mixed ecological green mortgage on the market.
However, according to information gathered by the Asociación de Usuarios Financieros (Asufin), the cost of these attractive and varied proposals is a higher mortgage payment to buy a flat in Valencia.
The numbers the green mortgage can't hide
Behind the very strategic marketing of green mortgages to encourage people to buy a Valencia flat in conditions that are committed to sustainability, the mortgage rates hide the fact that they cannot hide what lies behind this desperate attempt to push us towards extreme sustainability at any price.
In its IV study focused on the conditions of financial products, Asufin revealed that the APR of the fixed green mortgage is 5.63 % and that of the variable green mortgage is 4.63 %, both figures well above the 3.75 % APR offered by the average mortgage in the market.
Which financial institutions offer green mortgages?
Currently, if you want to buy a flat in Valencia with a green mortgage, you can obtain it through the following financial institutions:
- Caixabank
- Banco Santander
- BBVA
- Cajamar
- Banco Mediolanum
- Triodos Bank
- Bankinter
What are green mortgages for?
The green mortgage is designed to help you buy an environmentally friendly flat in Valencia, i.e. one that has been designed to save energy consumption. At the same time, it is also available to finance the construction of new buildings in Valencia and to refurbish a home in order to make it more sustainable.
In the beginning, this financial product was presented as a way of rewarding those who wanted to buy flat Valencia that was sustainable and environmentally friendly. The problem is that such an award is no longer reflected in reality.
What was the initial promise of green mortgages?
In order to persuade mortgage users to opt for the green alternative, financial institutions had to promise more than just energy savings in the home, which is why they promoted the launch of green mortgages by claiming that they would offer a cheaper APR than the conventional mortgage. However, when we analyse the practical cases, we see that their rates are from 0.88 % to 1.88 % more expensive than the traditional ones.
And these percentages are those reported by Asufin, as the comparator Kelisto shows an even more alarming figure: the interest rate of the fixed green mortgage is on average 6 % higher than that of the ordinary mortgage. And there is more: it has been found that the best green mortgage is 33 % more expensive than the conventional one.
Eligibility for a green mortgage
The green mortgage has certain requirements, as it is not granted for the purchase of all the flats Valencia that they are sustainable, but that the following conditions must be met:
- Have an A or A+ energy rating
- Have 20 % of the value of the house to pay for it at the time of purchase, as the bank only covers up to 80 % of its value.
- Having a high income
Advantages of the green mortgage
Beyond the lack of ethics of the entities that offer it, who presented it in one way and then put it into practice in another, the green mortgage has many advantages for those who are thinking of buying a flat in Valencia or reforming it to comply with sustainability standards. These advantages are the ones we tell you about from our Valencia real estate agency:
Economic savings
Although these savings do not appear, as promised and implemented in the beginning, in mortgage payments, saving money is a reality with green mortgages, since what they finance is a sustainable home, with which you will save money every month on electricity and gas consumption, and, if we go to the extreme, also on water, because certain sustainable housing proposals include the recycling of the water used inside the home.
Revaluation of your home
A house of new construction Valencia sustainable property is worth significantly more than one that has nothing to do with sustainability. Therefore, whether you apply for a mortgage to refurbish your Valencia penthouse or to buy a new one, that property will be worth more in the future than one with the same, or even better, conditions that is not sustainable, and that will benefit you significantly if you decide to sell it.
Better quality of life
Heating a room with your own solar energy guarantees you a better quality of life than if you were releasing chemicals into the air you breathe in your home that have been proven to damage your health. In addition, reducing our monthly expenses leads to a reduction in stress, which also represents an improvement in quality of life. Overall, the green mortgage opens the door to a new way of living, where clean air, saving money and reducing environmental chemicals are part of the deal.
Environmentally friendly
Ultimately, by buying your Valencia penthouse with a green mortgage you will be part of the change the planet needs to continue to be the home for your children, grandchildren and all your offspring that it has been for you.
What is the future of green mortgages?
It is clear that currently the green mortgage for your Valencia penthouse is not the best option from a personal finance point of view. For this new way of accessing housing to prevail over the traditional mortgage, it will be necessary for banks to improve their prices and fulfil the initial promise of offering a cheaper product than the existing one, while it is also essential that more financial institutions are encouraged to offer it, as this will generate more competition and, therefore, better price options for customers. Finally, from our Valencia real estate agency we are convinced that banks need to promote the green mortgage in a more massive way, in order to reach as many financial users as possible.
Awaiting finalisation of the EeMap project
The EeMap project, launched in 2018, holds great promise for the final consolidation of the green mortgage. Its initiative consisted of launching a standard green mortgage for the whole of Europe in order to assess the reception of users. Once the project is stabilised and consolidated, it is very likely that the green mortgage will reach the conditions that were promised when it was in its initial phase.
Where to start?
The first step towards a green mortgage, or traditional mortgage, is to choose the Valencia house or penthouse in which you are going to live. As a luxury real estate agency Valencia 360 we have a wide portfolio of properties, as well as custom designed new build projects in Valencia, contact us and let's start your new life as a homeowner!