Mortgage Overview

A policy or policy statement on ethical lending is not in place. However, Barclays states that it does not engage in business operations or with the governments in Sudan and Burma/Myanmar and that it considers other contentious borrowing requests on a case-by-case basis.

Barclays further states that it applies the Equator Principles to some development projects.

An Environmental and Social Risk Policy team advises on Barclays lending functions worldwide.

1. Credit Lending 

Barclays and its mortgage business, Woolwich, offers 60% to 85% LTV (loan-to-value) rates depending on mortgage product. This compares favourably with the FSA’s Turner Review which suggests that LTV rates be set at 90%, i.e. that borrowers should have at least a 10% deposit for a mortgage. 

The bank’s LTI (loan-to-income) rates are a standard multiple of 3.25 for single borrowers but that this can be increased up to 4 or 5 times income for applicants with a medium or high credit score. The Turner Review’s analysis suggests lending to 3.5 times of income for single borrowers.

Barclays state that is uses income multipliers as a guide but that it relies on affordability assessments in its lending decisions. 

Barclays states that it discloses and carries out credit reference searches on all unsecured credit applicants and that it also uses a credit scoring tool in its assessment. 

No data was found or supplied as to whether the bank has a policy to avoid or prevent offering unsolicited increases in credit limits to customers. 

2. Debt Warning 

Barclays and Woolwich issue a generic warning to mortgage borrowers: ‘Your home may be repossessed if you do not keep up repayments on your mortgage’. 

With regard to unsecured loans, the bank states that if it cannot come to an ‘acceptable agreement’ with customers with regard to repayments it may have to take actions such as:

• Tell credit reference agencies about the customer’s account which would have implications for getting further credit

• Issue a default notice or termination notice under the Consumer Credit Act of 1974, which requires the customer to pay the full amount of missed payment in 14 days

• Close the customer’s account, cancel cards and cancel regular repayments of debt and then seek repayment through official channels

• Refer the customer’s account to a debt collection agency

• Take legal action which may lead to a court judgement which will in turn be registered with credit reference agencies and may require customers to pay legal fees

The bank refers customers to the FSA Debt Test from the ‘Thinking of Borrowing’ section on its website. This facility is designed to help customers find out whether they have, or are likely to have, problems with borrowing. It also has tips on what to do if customers find themselves in difficulty. 

3. Debt Management and Advice 

Barclays have policies in place with regard to payment default and handling payment problems on secured loans (mortgages). The banks also outline the steps leading up to repossession of property/court action. The bank states that it will:

• Contact customers at an early stage to discuss problems
• Look at arranging a new payment plan
• Give customers ‘reasonable time’ to pay back any missing payments
• Change the date that payments are due each month
• Allow customers to pay their mortgage over a longer period of time
• Pay reduced payments or interest-only payments for a period of time 

In these instances the bank adds the caveat that these options may cost the customer more money in the long run.  No information regarding the option of payment holidays/breaks was found. However, the bank has stated that in ‘financial hardship cases’ reduced payments may be acceptable for a period of time. 

With regard to providing re-housing advice, Barclays states that if they do repossess a customer’s home, they will give ‘advice about getting in touch with your local authority to see if they can find you somewhere else to live’. However, specific information regarding direct liaison with organisations such as Shelter and the Citizens Advice Bureau to work out re-housing arrangements was not found. 

With regard to unsecured loans, again no information on the possibility of payment holidays/break was found. Apart from the warnings referred to above, no evidence of policies on payment default and handling payment problems for unsecured loans was found apart from generic statements about trying to give customers the ‘best support and guidance’ to manage their debts.