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
Nationwide Building Society
Green/Ethical Products
- Ethical Trust (via Legal & General)
- Basic Bank Account
Ethical Lending or Insurance
Nationwide does not have an ethical lending policy. However, as a building society the majority of its lending is to individuals in the form of mortgages. Its commercial lending is concentrated in the following three sectors:
- UK registered social landlords (Housing Associations)
- Commercial and residential property investors
- Private Finance Initiatives (PFI) funding schools, hospitals and social housing projects
Responsible Lending
1. Credit Lending
Nationwide Building Society offers an LTV (loan-to-value) rate up to 85% for new customers. This compares 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.
However, the building society is also offering 125% mortgage to existing customers in negative equity who want to move house. Negative equity means that the value of the customer’s home is less than the amount they owe on their mortgage. Figures for its LTI (loan-to-income) rates were not found.
Nationwide says that it makes an assessment of a customer’s ability to make regular payments using ‘appropriate credit assessment techniques’, before providing credit. It further states that it may share credit data with other lenders: ‘both to improve the quality of our decisions and to reduce the risk of you becoming over-committed’.
Nationwide says that credit limit increases are assessed on a customer’s personal circumstances and that the customer can request a change to their limit at any time.
2. Debt Warning
Nationwide issues the generic warning to its mortgage customers: ‘Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.’ No warnings were found in relation to the consequences of falling behind on payments on unsecured credit.
The building society provides a link to the FSA’s Debt Test as part of its ‘Payment Difficulties’ section. This test is designed to help customers find out whether you have, or are likely to have, problems with borrowing. It also has tips on what to do if customers find themselves in difficulties.
3. Debt Management and Advice
Nationwide outlines the steps involved in its repossession process. It also presents possible temporary solutions for customers defaulting on loan repayments, these are:
- An arrangement - an agreement to make payments over and above the contractual minimum, to repay arrears
- A concession - an agreement for the customer to make payments below the contractual minimum, which may be agreed to assist cases of financial difficulties
Nationwide may grant a mortgage payment holiday of up to three months in the case of an emergency, such as a bereavement or hospitalisation. Mortgage payment breaks between three and 12 months may also be offered. To avail of these the customer must have held a Nationwide mortgage for more than one year and have a mortgage that is less than 80% of the value of the home at the end of the payment holiday. Such holidays are not permitted for personal loans.
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
Nationwide offers a basic account with no credit facilities to low income/financially excluded customers.
The building society does not engage in partnerships with credit unions or other mutual organisations.
In terms of access provisions for financially excluded customers, Nationwide is involved with a coalition of Bristol-based anti-poverty groups to provide free-to-use cash machines in low-income areas across Bristol and Weston-super-Mare.
At a branch level, Nationwide offers facilities to assist those with impaired hearing or sight, literature in the most common foreign languages and in Braille, large print and audio. ‘Helping Hand’ units are also available at branches and these contain Braille bank note sizers, magnifiers to assist customers who may have difficulty reading small print, clipboards and a specially-designed lap-pad for customers in wheelchairs.
The building society also makes some access provisions for customers in small towns and villages by offering services through local agencies.
As a building society Nationwide has limited involvement in microfinance though it states that is offers products to those who are self-employed through its specialist lending arms.
Nationwide states that it does not offer preferential lending within deprived communities, it does, however, offer Private Finance Initiatives (PFI) funding new schools, hospitals and social housing projects.
Environment
The building society’s environment policy addresses the key issues of energy efficiency and waste management and a management system is in place to monitor the policy’s implementation. It also shows a commitment to continued improvement of its environmental performance.
Carbon Neutral
No set target, but Nationwide states that it has reduced the carbon footprint of its business operations by 85% since 2005.
Equal Opportunities
The building society’s equal opportunities policy addresses the key issues: race, gender, disability and sexuality.
Women on the Board
The building society reported 20% in 2008.
Voluntary Standards & Initiatives
Charitable Giving
The building society has pledged to donate 1% of its pre-tax profits.
Nationwide Building Society
- Current Accounts
- Savings
- Investments
- Credit Cards
- Loans
- Mortgages
- Insurance (Home, Motor, Travel, Life, Critical Illness, Income Protection)
Nationwide Building Society
Nationwide Building Society
Member Service
Kings Park Road
Moulton Park
Northampton
NN3 6NW
