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
Halifax
Green/Ethical Products
- Basic Bank Account (Easycash)
- Secured mortgage lending in deprived areas
- Community banking current accounts and lending
Ethical Lending or Insurance
We found no public data on having an ethical lending policy in place, although the parent company, HBOS, identified the need to implement such a policy in 2004 (i.e. 'Future challenges for HBOS include widening the scope of its corporate responsibility to start dealing with issues such as third world poverty or lending to companies involved in supporting the arms trade' as in Corporate Responsibility report 2004).
Responsible Lending
1. Credit Lending
Halifax offers LTV (loan-to-value) mortgage rates of 60% to 95% depending on mortgage product. The 95% rate does not compare favourably with the FSA’s Turner Review suggestion of a maximum LTV of 90%, i.e. the borrower should have at least a 10% deposit.
The LTI (loan-to-income) rate is not specified.
With regard to unsecured loans the bank uses credit scoring based on information submitted by the applicant and provided by credit reference agencies to assess the borrower’s ability to make repayments.
On the subject of credit limits, the bank says that it is happy to review a customer’s credit limit based on an assessment of their ability to pay the new amount. Additionally, the customer must have held the card for at least six months.
However, the bank says that is may increase a customer’s credit limit automatically from ‘time to time’ and that the customer will be advised in writing when this occurs. The customer can cancel the credit extension by calling customer service.
2. Debt Warning
The bank suggests customers look out for ‘warning signs’ of possible problems with their finances such as only making the minimum payment on credit cards, borrowing cash from family and friends, borrowing or using credit cards to pay off debts, using a credit card to pay for utilities and grocers but not clearing the monthly balance or being declined credit.
It also highlights the negative effect missing credit card payments may have on a customer’s credit rating.
The bank links to an interactive budget calculator provided by the FSA which calculates the percentage of monthly incomings spent in in different areas – household, leisure etc. Neither warnings nor advice are provided alongside end calculations. The bank does not refer customers to the FSA’s Debt Test which is designed to help them find out whether they have, or are likely to have, problems with borrowing.
It uses a generic warning with regard to mortgages: ‘Your home may be repossessed if you do not keep up repayments on your mortgage’.
3. Debt Management and Advice
The bank does not provide a clear set of steps with regard to the repossession process, nor does it outline how it may help customers restructure their mortgage payments.
It does offer payment holidays ‘for a period of between one and six months over the life of the mortgage’ and for customers you have had their mortgage for at least three months and who are up to date on their payments. Interest is still charged interest on the mortgage balance during this period. Payment holidays are not available on unsecured loans under £25K.
Additionally, the bank, through its Money Management Team, suggests customers in financial difficulty consider a number of external options, including:
- Temporary Repayment Plans – the customer’s budget is calculated and the money they can afford to pay creditors is divided up fairly between them, based on how much is owed to them
- Individual Voluntary Arrangement (IVA) - this is an alternative to bankruptcy and is a formal arrangement between the customer and their creditors to pay an agreed amount of the debts over a set period. An Insolvency Practitioner is required to set this up and they usually charge a fee
- Bankruptcy – this comes with a warning as to the seriousness of choosing this option and with a recommendation to seek professional advice
- Trust Deeds – these apply to customers in Scotland and are a way of setting up a monthly repayment schedule based on what a customer can afford to pay. A deed will typically last for three years, after which any remaining debts are normally written off. The potential damage to the customer’s credit rating in choosing this option is highlighted
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 repossession.
Financial Exclusion
The bank offers a basic bank account to low-income customers and offers secured mortgage lending in deprived areas.
In terms of access provisions, Halifax provides documents in large print, Braille, and on audio cassette. Other provisions include Typetalk, wheelchair access, low-level counters and accessibility measures on its website. The bank also runs some mobile units to provide a banking service to underserved communities.
Environment
The HBOS Group’s environmental policy addresses the key issues of energy efficiency and waste management and shows a commitment to continued improvement of its environmental performance.
Carbon Neutral
The HBOS Group’s business operations became carbon neutral in 2007.
Equal Opportunities
The Group’s policy addresses the key areas of gender, race, disability and sexuality.
Women on the Board
The parent company HBOS reports that 25% of board members are women (2007).
Voluntary Standards & Initiatives
Parent company, HBOS, is a signatory/member of:
Halifax
- Current Accounts
- Savings
- Investments
- Credit Cards
- Loans
- Mortgages
- Insurance (Home, Motor, Travel, Life, Health, Pet)
- Student Current Account
