Banks take everything into account when granting a mortgage loan. An old student loan, revolving credit, a lease car – it all affects the maximum mortgage. The exception is an energy-guzzling house. Although it can save hundreds of euros per month, the maximum loan for such a house is equal to that for an energy-efficient house. This could change, partly due to the sharp rise in gas prices, and that would have serious consequences for owners and buyers.
The energy consumption of a house does not really count when it comes to mortgage lending. Budget Institute Nibud sets the standards for the maximum mortgage every year, based on an average consumption, comparable to that of a house with an energy label C. As a result, the maximum mortgage for a house with an energy bill of 80 euros per month is the same as that for a house with an energy label C. for a comparable home that uses electricity and gas for 300 euros per month.
In the latter case, there is certainly a risk of payment problems, says economist Carola de Groot of RaboResearch. This became apparent after an analysis of tens of thousands of Rabobank mortgages. “It showed that owners in a house with an F or G label had a slightly greater chance of payment arrears. This was especially true if they spent a large part of their income on energy.”
There are currently no signs that homeowners are getting into trouble due to rising energy costs. De Groot points out that according to Nibud, less than 1 percent of them have payment problems. But that could change. “You can imagine that people will get into trouble if energy costs are structurally higher. That can lead to payment arrears.”
Vulnerability
Mortgage standards are there to protect against overcrowding and to ensure that people can afford their monthly interest and principal. De Nederlandsche Bank (DNB) has been arguing for a change in mortgage standards for some time, because it believes that people are getting too deeply into debt. The regulator sees confirmation that this is really necessary in the rapid increase in energy costs.
A spokesman for the central bank: “Owners of an energy-inefficient home can see their fixed costs rise sharply due to higher energy costs. This can lead to payment problems for households with a low income and little wealth.”
In the current system, lending standards are based on one standard household type. As a result, they do not offer the same degree of protection against excessive lending to different types of households. Rising energy prices illustrate this vulnerability, according to the DNB spokesperson. “Households with energy-inefficient homes are more likely to run into problems as a result, but are not protected by stricter borrowing standards.”
Triodos is so far the only bank that already has stricter standards. Anyone who buys a home with a low energy label can only borrow 90 percent of the maximum for someone with a high label since the middle of last year. This concerns both 90 percent of the home value and the maximum mortgage based on income. The interest rate also varies: for the mortgage loan on a house with an energy label E, F or G, the owner Triodos pays 0.4 percentage point more than for an energy-neutral house (A++++).
Also read: Hardly anyone can escape the consequences of the high gas price
Houses under water
More banks are now looking at the relationship between mortgage size and energy costs. For example, ABN Amro wants to investigate the effects of a heavier weighting of energy consumption in mortgage lending. Charissa Cardon, head of sustainability and mortgage strategy at ABN Amro: “We want to know whether further differentiation of the loan standard is a solution, and for which problem. In doing so, we must not only look from a sustainability perspective, but at the complete picture. Differentiation in lending standards should not lead to many undesirable side effects in the longer term.”
What side effects does Cardon mean then? “That houses with a bad energy label are flooded” [waarbij de hypotheek hoger is dan de waarde van het onderpand], for example, or even that people can no longer sell their homes because of this. And think of starters; they are already having trouble finding an affordable house to buy and that will become even more difficult. I think you should investigate this carefully.”
Big impact for starters
The impact of factored energy consumption on the maximum mortgage can indeed be large. When asked, mortgage advisor Ikbenfrits.nl calculates roughly what it means if energy costs rise by another half. A starter with an annual income of 40,000 euros gross could in that case still borrow about 155,000 euros. That is about 28,000 euros less than now. For a couple with a combined gross income of 80,000 euros per year, the maximum mortgage would be approximately 56,000 euros lower and approximately 383,000 euros.
If buyers can borrow less for an energy-guzzling house, this can also have consequences for the home value. Sustainability already has an effect on that value, says De Groot Van RaboResearch. Research by Tilburg University showed that the ‘green premium’ has increased over the years. “People are increasingly willing to pay for an energy-efficient home. At the same time, it also turned out that the premium is lower in areas with a heavily tense housing market. If there is a lot of demand and little supply, the effect that people are willing to pay more for an energy-efficient house is less pronounced.”
Energy saving
Because the housing market in almost the whole of the Netherlands is exceptionally tight, energy consumption hardly plays a role for most home seekers. But it doesn’t have to stay that way. If the market expands and mortgage regulations become stricter, an energy-guzzling house can suddenly become difficult to sell.
To prevent that, energy-saving measures can be a solution, concludes De Groot. “A gas price that remains at a higher level can provide a major incentive to get started quickly. Ultimately, the housing stock will largely come from gas, and houses must become more energy-efficient. At least people have that certainty.”
A version of this article also appeared in NRC in the morning of November 19, 2021
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