Using data on the universe of mortgages on offer in the United Kingdom, we study the prevalence and features of green mortgages. These products offer financial incentives for energy-efficient properties, with cashback
incentives more common in the owner-occupied segment and preferential interest rates in the landlord segment. Lenders provide financial benefits on green mortgages compared to market averages for non-green products. However, these advantages diminish significantly when analyzing within-lender variation, and differ significantly: preferential rates offer an average 10-basis-point discount (equivalent to £860 in present value), while cashback benefits are economically negligible. We evaluate two explanations for why lenders offer green mortgages: (i) lower financing risk, as more energy-efficient properties are less expensive to run and
have higher collateral value; and (ii) customer acquisition, as part of their product differentiation strategy. We do not find support for the former, but uncover evidence consistent with the latter for cashback
products.
