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
Egg
Green/Ethical Products
None
Ethical Lending or Insurance
No evidence of an ethical lending policy.
Responsible Lending
1. Credit Lending
Egg offers 95% LTV (loan-to-value) rates for two and three year fixed-rate mortgages (2007). This does not compare 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. Egg has not publicly disclosed its LTI (loan-to-income) rate for mortgage products. The Turner Review’s analysis suggests lending to 3.5 times of income for single applicants.
However, Egg indicates that it has stopped offering mortgage products. Though the above rates still apply to existing customers.
In terms of conducting checks into the credit history of customers seeking unsecured credit, Egg indicates that it ‘may’ conduct checks with credit reference agencies but specific details are not supplied publicly.
2. Debt Warning
The bank issues the generic warning to mortgage customers: ‘Your home may be repossessed if you do not keep up repayments on your mortgage.’
For unsecured loans the bank provides some general guidelines for customers to avoid getting into debt. These include checking the balance on accounts before making withdrawals, repaying more the minimum amount, paying on time and stressing the importance of budgeting.
The bank does not use the FSA Debt Test or an equivalent. 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
No information was found regarding the bank’s policies on payment default and handling payment problems, or the stages involved in the repossession process or before court action, on secured loans (mortgages).
With regard to unsecured loans the bank states that it might offer a number of options, including arranging an affordable payment plan; short-term reduced payments; amending payment dates; temporarily increasing the credit limit on cards; and altering payment schedules.
Payment holidays are offered on the bank’s two and three-year fixed-rate mortgages but the possible duration of these are not stated. With regard to unsecured credit, information was found for Egg’s credit cards which states: ‘We [the bank] may allow you [the customer] occasional payment holidays. If we do this, we will still charge interest as if a payment was due during the payment holiday.’
No public data was found as to whether or not the bank offers re-housing advice to customers whose homes have been repossessed or whether it liaises with organisations such as Shelter and the Citizens Advice Bureau to work out re-housing arrangements.
Financial Exclusion
No evidence of policy or products.
Environment
The company’s environmental policy refers to the key areas of climate change/energy efficiency and waste management. However, there is no evidence of a long term commitment to continued improvement of its environmental performance.
Carbon Neutral
No evidence was found of a pledge on making business operations carbon neutral.
Equal Opportunities
Egg has a non-discrimination policy for employees but does not cover disability and sexual orientation.
Women on the Board
No data found.
Voluntary Standards & Initiatives
No evidence that Egg is a signatory to any charters or initiatives. Its parent company, Citigroup, is a signatory/member of the following:
Egg
- Current Accounts
- Savings
- Investments
- Credit Cards
- Loans
- Mortgages
- Insurance (Home, Motor, Travel, Emergency)
