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
Northern Rock
Green/Ethical Products
None
Ethical Lending or Insurance
Northern Rock states that it seeks to avoid lending which carries increased potential for environmental risk (e.g. development finance and loans to industrial users) and that for the most part, its lending policy excludes the sectors which are identified with the primary causes of land contamination.
Professional advisors including valuers and solicitors are engaged to assess the impact of environmental risk prior to lending and credit approval. An in-house lending team also make assessments prior to lending/credit approval based on their knowledge of Northern Rock's environmental risk and impact assessment policy.
Responsible Lending
1. Credit Lending
Northern Rock offers LTV (loan-to-value) mortgage rates up to 85%, comparing 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. Its LTI (loan-to-income) rate is a maximum of 4.5 times gross income for a single applicant, this contrasts with the Turner Review’s suggestion of just 3.5 times.
The bank investigates customers’ credit backgrounds via the Council of Mortgage Lenders' Possession Register and at credit reference agencies. It may also use credit scoring to assess applications.
2. Debt Warning
Northern Rock uses a generic warning with regard to mortgages: ‘Your home may be repossessed if you do not keep up repayments on your mortgage’. No warnings as to the consequences of payment default for personal loans were found.
The bank does not refer customers to the FSA’s Debt Test which is designed to help customers find out whether you have, or are likely to have, problems with borrowing.
3. Debt Management and Advice
The bank outlines the following steps and options for customers in financial difficulty:
- It will contact the customer ‘as soon as possible’ to discuss the problem
- It will talk to an agency which has given the customer debt advice (for example, Citizens Advice), if requested
- It will give the customer ‘reasonable time’ to pay back the debt
- Look at arranging a new payment plan with the customer
- Consider changing the way he customer makes their payments, or the date they make them on.
- Look at allowing mortgage customers to pay back the loan over a longer period of time, thus reducing monthly payments
- Consider changing the type of mortgage
Mortgage customers may apply for a one month payment holiday for every nine consecutive full monthly payments made. The maximum payment holiday period is three months, which can be applied for once the customer has made 27 consecutive full monthly payments.
The bank does not provide a clear set of steps with regard to the repossession process.
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
Northern Rock does not offer any products to low income/financially excluded customers.
Its Foundation has supported the development of credit union services for disadvantaged communities within its impact region, north-east of England and Cumbria.
In terms of access, the bank offers services for customers with visual impairments in the form of Braille, large print and documentation in audio format. It also offers British Sign Language (BSL) interpreters for deaf or hearing impaired customers on request.
Northern Rock has developed the Street North East Project to make micro-loans to micro-entrepreneurs in the north east of England, centring on Newcastle.
There is no public data regarding preferential lending within deprived communities.
Environment
The bank addresses the key issues of energy efficiency and waste management in its environment policy and shows a commitment to continued improvement in its environmental performance through the use of a system of targets.
Carbon Neutral
No evidence was found of pledge to make business operations carbon neutral in the bank’s environmental policy.
Equal Opportunities
Northern Rock’s comprehensive equal opportunities policy addresses the keys issues of gender, race, disability and sexuality.
Women on the Board
10% of board members are women (2007).
Voluntary Standards & Initiatives
Northern Rock is a member of:
Charitable Giving
The bank donated 5% of its pre-tax profits in 2006 (average donations are between 0-1%). Furthermore it donated £14.8m to the work of its foundation, Northern Rock Foundation, irrespective of a loss before tax of £167.6m in 2007.
Northern Rock
- Savings
- Loans
- Mortgages
Northern Rock
Northern Rock
Northern Rock House
Gosforth
Newcastle upon Tyne
NE3 4PL
