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
Mortgage Provider
Coventry Building Society
Green/Ethical Products
None
Ethical Lending or Insurance
As a mutual building society the bulk of Coventry’s business is with private individuals. It does not undertake any commercial lending.
Responsible Lending
1. Credit Lending
Coventry Building Society offers an LTV (loan-to-value) rate of up to LTV up to 95% (for 6.99% fixed rate mortgage). This does not compare favourably with the suggestions made in the FSA’s Turner Review that a maximum of 90% of a property’s price be loaned i.e. that borrowers should have at least a 10% deposit for a mortgage.
The building society offers LTI (loan-to-income) rates of 3.6 and 4 depending on the customer's income range. The Turner Review suggests lending 3.5 times the annual wage of a single mortgage applicant.
The building society does not offer unsecured credit, for example personal loans.
2. Debt Warning
The building society issues a generic repossession warning: ‘Your home may be repossessed if you do not keep up repayments on your mortgage.’
The building society does not use the FSA Debt 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 difficulties.
Coventry does offer a bugdet planning facility but no warnings are attached to its results.
3. Debt Management and Advice
With regard to policies on payment default and handling payment problems, Coventry Building Society, says it will:
- Talk to an external agency which gives debt advice (for example, the Citizens Advice Bureau) if requested
- Give the customer ‘reasonable time’ to pay back the debt
- Try to arrange a new payment plan taking the customer’s and the building society’s interests into account
- Change the way the customer makes payments or the date they make them
- Allow the customer to pay back their mortgage over a longer period of time, thus reducing monthly payments
- Change the type of mortgage the customer has
- Agree to let the customer stay in the property and sell it themselves
- Send a debt counsellor to discuss the customer’s financial circumstances, and add the cost of the visit to the mortgage account
The building society also outlines the steps leading up to repossession of property/court action.
Payment holidays are available for up to three months, but the circumstances under which they are granted is not made explicit.
No information was found as to whether 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
Coventry BS does not offer any products to the financially excluded.
While it states that it does not have formal access schemes, it tends to have bilingual staff in areas with high concentrations of speakers of other languages.
Because it does not lend commercially, Coventry is not involved in either microfinance or community lending or investment.
Environment
No set policy was found, however Coventry states that its head office has been using ‘green’ electricity since April 2007 and working with the Carbon Trust to become more energy efficient.
Carbon Neutral
No evidence was found of a pledge to make business operations carbon neutral.
Equal Opportunities
The building society’s equal opportunities policy does not address the key issue of sexuality/sexual orientation.
Women on the Board
2007 figures indicate that 27.3% of the board were women.
Voluntary Standards & Initiatives
Coventry is not a signatory of any relevant charters or initiatives, primarily because it does not lend commercially.
Charitable Giving
Coventry donated 0.16% of its pre-tax profits in 2007.
Coventry Building Society
- Current Accounts
- Savings
- Loans
- Mortgages
- Pensions
- Insurance (Home, Contents, Life and Critical Illness, Mortgage and Income)
Coventry Building Society
Coventry Building Society
PO Box 9
High Street
Coventry
CV1 5QN
