Mortgage Overview
A mortgage is the biggest loan most people will take out in their lifetime. But just how is this loan funded?
Who else does your mortgage provider do business with? Might they also lend to big corporations involved in areas you don't approve of? Do they lend responsibly to their customers and offer assistance to those who fall into financial difficulty? Do they offer incentives to environmentally-sound projects?
If you're thinking of buying property or your existing mortgage is up for renewal, this section will help you find a green and ethical provider.
Find out about your current or prospective provider
What are the green and ethical options?
Find out about your current or prospective provider
Use the mortgage search to find out more about your current or prospective mortgage provider's green and ethical credentials. Key areas considered are responsibility toward customers, financial exclusion, equal opportunities, environment and also whether they have an ethical lending policy or guidelines in place.
Responsible lending
The importance of responsible lending cannot be overemphasized. The recent global economic downturn is often attributed to the 'sub prime crisis'. This refers to the granting of loans to people who are considered to be in higher risk categories - those more likely to default or who have a poor credit history, for example.
This type of lending is not problematic in itself - credit unions and community development finance institutions regularly lend to sub prime candidates.
Instead, irresponsible lending to customers in the sub prime category is the problem. In the build up to the crunch some financial institutions were lending 100% mortgages (and in some cases more) to people who would not be able to make their repayments in the long term.
Key questions to ask: Does your bank have responsible lending policies that ensure that its products are targeted in an appropriate manner? And does it provide advice or debt management services to customers who fall into financial difficulty?
What are the green and ethical options?
- Co-operative Bank: has a well-recognised ethical policy in place that governs all its lending decisions and products including mortgages. It also offers a specific Green Mortgage and re-mortgage product. Additionally it offers a reduced-rate loan to mortgage customers wishing to purchase and install energy efficient home technologies from an approved list.
- Ecology Building Society: has an 'ecological' lending policy which applies across all lending practices. It offers a number of green mortgage options.
- Norwich & Peterborough Building Society: offers a Green mortgage which plants 40 trees per mortgage and available for new homes with a Standard Assessment Procedure (SAP) rating of 100 or higher or to those looking to make their home more energy efficient. It also offers a Brown mortgage which includes a free energy survey and advice on making property energy efficient.
Your next steps
Check out our Next Steps Guide - Mortgages for suggestions on how to find the right green and ethical mortgage provider for you as well as the questions you should be asking your current or prospective provider.
Mortgage Search
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Mortgage Provider
Clydesdale Bank
Green/Ethical Products
- Basic Bank Account (Readycash)
- Personal insurance for terminal/critical illness and disability
Ethical Lending or Insurance
Parent company, NAB (National Australia Bank) has a policy not to finance the arms trade, whether it is conventional arms (including landmines or any equipment designed to be used as an instrument of torture) or nuclear, chemical, biological or other weapons of mass destruction. It also has policies on tobacco, pornography and animal testing. NAB has internal credit policies on the environmental impact of its lending and signed up to the United Nations Environmental Programme for Financial Institutions, which outlines criteria for investment in developing countries. In 2007 NAB became a signatory to the revised Equator Principles which provide criteria for lending to large project finance initiatives.
Responsible Lending
1. Credit Lending
The Clydesdale Bank offers an LTV (loan-to-value) mortgage rate of up to 80%. This compares very favourably with the FSA’s Turner Review which suggests LTV rates should be no greater than 90%, i.e. that customers should have at least a 10% deposit.
No information on the bank’s LTI (loan-to-income) rate was found. The Turner Review suggests a rate of 3.5 times income for single applicants.
The bank uses credit scoring to assess loan applications. However, it is not clear if the scoring is based on information submitted by the applicant only or if information from credit reference agencies is included.
While no specific information as to whether a policy is in place to avoid or prevent offering unrequested increases in credit limits to customers, the bank has a customer care unit which gives advice about operating credit card accounts and financial management. Customers can request a reduction in their credit limit and change their bill payment dates to align better with their income streams. The unit refers some customers to the National Debtline.
2. Debt Warning
The bank issues a generic warning to mortgage customers: ‘Your home may be repossessed if you do not keep up repayments on your mortgage.’ No warnings were found about the consequences of not making repayments on time or running up debts for unsecured credit customers.
Customers are not referred to the FSA Debt Test or equivalent test. This test 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
No policies were found on handling customers who have defaulted on their payments or fallen into financial difficulty. Nor are the steps leading up to repossession or court action outlined.
With regard to payment holidays on secured loans, the bank states that they are available for up to six months on residential mortgages, though it is not specified how a customer might qualify. Payment holidays are not allowed on unsecured loans, though first payments may be deferred until the 14th day in the case of a loan repaid weekly and the 56th day in the case of a loan repaid monthly.
No evidence was found that the bank offers re-housing advice or liaises with organisations such as Shelter and the Citizens Advice Bureau to work out re-housing arrangements with mortgage customers facing re-possession.
Financial Exclusion
The bank offers the Readycash basic bank account to low-income customers.
The bank provides access services for disabled customers in the form of talking ATMs, documentation in Braille, in-branch provisions and accessible website features.
Environment
A management system is in place to set targets and monitor progress and the bank expresses a commitment to continued improvement of its environmental performance. We could not find specific details of the policy and the issues it seeks to address e.g. energy efficiency and waste management.
Carbon Neutral
The bank has pledged to make its business operations carbon neutral by 2010.
Equal Opportunities
No reference to employees with disabilities was found in the bank’s equal opportunities policy statement.
Women on the Board
The bank reported a figure of 11.1% for 2007.
Voluntary Standards & Initiatives
Parent company is a signatory/member of:
- United Nations Environment Programme for Financial Institutions (UNEP FI)
- Carbon Disclosure Project
- Equator Principles
Charitable Giving
NAB reports that 0.47% of pre-tax profits were donated to community investment in 2007 (includes cash, sponsorship, employee volunteering, management costs, charitable gifts).
Clydesdale Bank
- Current Accounts
- Savings
- Investments
- Credit Cards
- Loans
- Mortgages
- Insurance (Home, Motor, Life, Critical Illness)
- Student Current Account
