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
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Mortgage Provider
Northern Bank
Green/Ethical Products
- Basic Bank Account
- Parent Study Loan
Ethical Lending or Insurance
The bank does not have an ethical lending policy.
Responsible Lending
1. Credit Lending
Northern Bank offers a maximum LTV (loan-to-value) mortgage rate of 90%. This compares favourably with the FSA’s Turner Review which suggests LTV rates should be no greater than 90%, i.e. that customers should have at least a 10% deposit.
No information on the bank’s LTI (loan-to-income) rate was found. The Turner Review suggests a rate of 3.5 times income for sole applicants.
The bank states that its loan application assessment process ‘may’ involve credit scoring. It is not clear whether this is based solely on information submitted by the applicant or whether checks are done with credit reference agencies.
No specific information was found as to whether a policy was in place 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
In presenting the options/steps it will take to assist customers in financial difficulty, the bank says that it will:
- Contact customers at an early stage to discuss their problems
- Try to arrange a new, mutually agreed payment plan
- Look at changing the interest rate on the mortgage or change the way payments are made
- Consider allowing the customer to pay back the loan over a longer period of time, thus reducing monthly payments but increasing the overall cost of the loan
- Consider allowing the customer to pay reduced payments or just the interest payments for a period of time
- Supply details of organisations who can give debt advice (for example, Citizens Advice Bureau), and talk to them if requested
The bank does not provide information on the steps leading up to repossession or court action.
Payment holidays may be available on secured loans but the necessary circumstances are not publicly outlined.
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 re-possession.
Financial Exclusion
Northern Bank offers a basic bank account to low income customers as well as a low-rate Parent Study Loan.
In terms of access, Northern Bank offers its product literature in Braille, large print and audio tape, on request.
It does not work in partnership with any credit unions or similar mutual organisations nor does it offer preferential lending within deprived communities. Furthermore the bank does not provide funding to microfinance projects.
Environment
The parent company’s environmental policy addresses the key issues of energy efficiency and waste management. It also states a commitment to the continued improvement its environmental performance.
Carbon Neutral
The parent company has pledged to make its business operations carbon neutral by late 2009.
Equal Opportunities
While the parent company’s policy makes reference to race, gender and sexual orientation, we could find no evidence that its equal opportunities policy extends to staff with disabilities.
Women on the Board
33% of parent company, Danske Bank Group's, board are women.
Voluntary Standards & Initiatives
Parent company is a signatory/member of:
Charitable Giving
The parent company, Danske Bank Group contributed DKr 29m, c. £3m, or just under 1% of its pre-tax profits, in donations in 2007.
Northern Bank
- Current Accounts
- Credit Cards
- Loans
- Savings and Investments
- Mortgages
- Insurance (Home, Life, Critical Illness, Repayment Protection)
