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
Islamic Bank of Britain
Green/Ethical Products
- Basic Bank Account
- Savings account open to the financially excluded
- Shariah compliant personal finance
- Shariah compliant business finance
- Masjid and Charities Account
Ethical Lending or Insurance
The bank lends in compliance with the tenants of Shariah law and therefore will not lend to companies involved in:
- Arms
- Alcohol
- Gambling
- Tobacco
- Pornography
Lending is also subject to Shariah restrictions around interest.
The lending practices of the bank are advised upon by an external Shariah Supervisory Committee and internal Shariah auditors.
Responsible Lending
1. Credit Lending
The Islamic Bank of Britain offers LTV (loan-to-value) mortgage rates between 60% and 80%. These compare very 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.
Specific figures for LTI (loan-to-income) rates were not found.
In assessing applications for credit, the bank requests details from the applicant so that it can run a credit search for them using one or more credit reference agencies.
No information was found as to whether the bank has a policy to avoid or prevent offering unrequested increases in credit limits to customers.
2. Debt Warning
The bank issues the following warning to its mortgage customers: ‘Your home may be at risk if you do not keep up repayments on your mortgage or any other debt secured on it.’
No warnings were found in relation to the consequences of falling behind on payments on unsecured credit.
No evidence was found that the bank uses or recommends the FSA Debt Test or an equivalent service. This facility is designed to help customers find out whether they have, or are likely to have, problems with borrowing.
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.
No information was found with regard to the possibility of repayment holidays. Also, 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 current account and a savings account that are accessible ‘to those who might be excluded from standard credit product requirements’.
The bank has also designed the Masjid and Charities Account specifically for British Masjids (mosques) and Madrasahs (religious schools), which have had difficulty using banking products and services.
The bank is currently running a partnership programme with a Northern Credit Union.
In terms of access the bank states that its call centre staff speak several languages. No provisions were found for customers with disabilities, however.
The bank is does not provide funds to microfinance projects nor did it supply information regarding preferential lending to deprived/financially excluded communities, though it did emphasize that most of its customers are members of deprived communities.
Environment
The bank does not have an environment policy.
Carbon Neutral
The bank has not pledged to make its business operations carbon neutral.
Equal Opportunities
The bank states that it will ‘employ the best person for the job regardless of colour, creed, gender, and ethnicity’. No explicit reference to disability or sexuality was found however.
Women on the Board
Figures from 2007 state that 27% of senior management positions are held by women.
Voluntary Standards & Initiatives
The bank is not a signatory of any relevant charters or initiatives.
Charitable Giving
Donations to UK charities amounted to £9,360 in 2007. However, the bank recorded a loss before income tax of £6,917,004 for the same year.
Islamic Bank of Britain
- Current Accounts
- Savings
- Mortgages
Islamic Bank of Britain
Islamic Bank of Britain
Customer Services Centre
PO Box 12461
Birmingham
B16 6AQ
