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

Responsible lending

What are the green and ethical options?

Your next steps

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.

Resources

60 Second Guides to Mortgages

Next Steps – Mortgages

Select your key green/ethical criteria

Green/Ethical Products Ethical Lending or Insurance Responsible Lending Financial Exclusion

Environment Carbon Neutral Equal Opportunities

Please click on any of the mortgage providers below to find out more
Mortgage Providers	Criteria
Bank of Ireland (UK)		13.3
Bank of Scotland		25
Barclays (incorporating Woolwich)		11.76
Birmingham Midshires
Bradford & Bingley		9.09
Bristol & West
Cahoot
Cheltenham & Gloucester
Clydesdale Bank		11.1
Co-operative Bank		10
Coventry Building Society		27.3
Ecology Building Society		37.5
Egg
First Direct		10.5
First Trust Bank		14
Halifax		25
HSBC Bank		10.5
ING Direct (UK)		31.2
Intelligent Finance
Islamic Bank of Britain		27
Lloyds TSB		14.28
M&S Money		10.5
MBNA Europe Bank Ltd		25
National Counties Building Society		14.3
Nationwide Building Society		20
NatWest		5.88
Northern Bank		33
Northern Rock		10
Norwich & Peterborough Building Society		15.4
Royal Bank of Scotland (RBS)		5.88
Scottish Widows
Smile		10
Standard Life		8.33
Tesco Personal Finance
Virgin Money
West Bromwich Building Society		9.09
Yorkshire Bank		11.1
Yorkshire Building Society		18.2

Mortgage Provider

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Royal Bank of Scotland (RBS)

Green/Ethical Products

Carbon offset payments
Eco-Markets
Solar Mortgage (through its partner Ulster Bank)
Basic Bank Accounts (RBS, NatWest, Ulster Bank)
Microfinance
Foundation Account (business account available 'regardless' of credit standing)

Ethical Lending or Insurance

While the bank does not have a broad group-wide ethical policy it does have guidelines on 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 bank'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

RBS offers LTV (loan-to-value) mortgage rates up to 90%, 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. However, the bank states that the 90% figure does not imply that higher LTV products may not be offered under certain circumstances.

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.

RBS runs credit checks on mortgage and personal loan applicants. These checks are based on information supplied by both the applicant and by requesting information from credit reference agencies. Similarly credit card customers are subject to credit scoring based on information provided on application, credit reference information and any existing or past account performance with the bank.

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 also outlines the 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 RBS offers payment holidays to mortgage customers, however there is no policy statement and circumstances are not outlined.

The bank states that it has a ‘suite’ of policies to assist customers experiencing financial difficulties but does not disclose specific details, i.e. whether payment holidays or restructured payments may be possible.

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

RBS states that it is the top provider of basic bank accounts in the UK with a 31% share, while the RBS Financial Inclusion Innovation Fund provides grants to voluntary and charitable organisations including the Royal National Institute for the Blind, Citizens Advice Bureau and Credit Unions.

RBS also works with Scotcash, a Community Development Finance Institution offering support to people in Glasgow who are otherwise excluded from financial services.

In terms of access provisions, the RBS Group has designed accounts to meet specific language needs with a strong focus upon the Polish population in the UK and mobile banking are offered to customers in some remote areas.

RBS is involved in microfinance projects in India.

The bank states that it lent £517m to SMEs in the 5% most deprived wards in the UK in 2007.

Environment

According to its Corporate Responsibility report however, 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 and has show 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 bank’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.