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
NatWest
Green/Ethical Products
- Carbon offset payments
- Basic Bank Account
- Foundation Account (business account available 'regardless' of credit standing)
Ethical Lending or Insurance
While the parent company, the RBS Group, does not have a broad, group-wide ethical lending policy it does have the following:
- Global lending and project finance for corporate customers (i.e. the Equator Principles are applied in project finance decisions)
- Ethical Code for Suppliers in line with the UN Global Compact principles (human rights)
The Group’s Sustainability Team manages all Corporate Responsibilities at executive level, including assessments of social and environmental impacts of the lending policy.
Responsible Lending
1. Credit Lending
NatWest currently offers LTV (loan-to-value) mortgage rates up to 90%. 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.
The LTI (loan-to-income) rate is not specified. The bank states that it uses an affordability assessment in making loan decisions but information on the factors considered or limits imposed are not made publicly available.
The bank uses information from credit reference agencies as well as behavioural and credit scoring techniques to assess secured and unsecured credit applications.
The bank does not have a policy to avoid making unsolicited increases to customers’ credit limits.
2. Debt Warning
The bank issues a generic warning to mortgage customers: ‘Your home may be repossessed if you do not keep up repayments on your mortgage.’
For credit card customers it states: ‘All introductory offers are conditional on you paying on time and staying within your credit limit.’
Though it does not refer customers directly to the FSA’s Debt Test, the RBS MoneySense website features a debt test that 'helps you find out whether you have - or are likely to have - problems with borrowing'.
3. Debt Management and Advice
With regard to mortgage customers experiencing difficulty making their repayments the bank says it will:
- Contact the customer ‘as soon as possible’ to discuss their problem
- Talk to debt advice agencies (e.g. Citizens Advice) and will act on the customers behalf if requested
- Give customers ‘reasonable time’ to pay back the debt
- Look at arranging a new payment plan with mortgage customers
- Consider changing the way the customer makes their payments or the date they are made
- Consider allowing the customer to pay back their mortgage over a longer period of time, thus reducing monthly payments
- Look at changing the type of mortgage
The bank outlines the possible steps involved if they move to repossess the customer’s home.
No similar assistance was found for customers with difficulties related to unsecured credit.
Evidence indicates NatWest offers payment holidays to offset flexible mortgage customers, however there is no policy statement, timeframe or circumstances outlined. Payment holidays are not offered on personal loans.
The bank states that it offers advice on re-housing for customers and makes customers aware of advice agencies such as Shelter and the Citizens Advice Bureau. However, it is unclear whether this advice extends beyond the provision of the organisations contact details to customers facing repossession.
Financial Exclusion
NatWest provides a basic bank account to low-income customers. It also offers special accounts to Polish immigrants.
In terms of access provisions, NatWest installed hundreds of ATMs in deprived and rural areas in the UK. The bank also provides services via mobile banks in some remote areas.
A new product, the Foundation account, was developed for customers without a strong credit history who intend to open small businesses.
Environment
According to its Corporate Responsibility report the RBS Group obtained all its UK and Ireland contracted electricity from renewable sources in 2007 and has made a significant investment in improving its energy efficiency as well as showing an ongoing commitment to the improvement of its environment performance specifically where it concerns energy efficiency and reducing carbon emissions.
However, similar commitments regarding waste management were not found.
Carbon Neutral
The Group’s stated goal is to reduce carbon emissions per employee in the UK and Ireland by 20% from 2006 levels by 2011. No pledge was found to become fully carbon neutral.
Equal Opportunities
The Group’s diversity policy addresses the key areas of gender, race, disability and sexuality.
Women on the Board
5.88% of parent company, RBS's, board members are women (2007).
Voluntary Standards & Initiatives
The parent company is a signatory/member of:
Charitable Giving
The parent company, RBS donated 0.38% of its pre-tax profits in 2007.
NatWest
- Current Accounts
- Savings
- Investments
- Credit Cards
- Loans
- Mortgages
- Insurance (Home, Motor, Travel, Life)
- Students Contents Insurance
- Students Current Account
