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
Scottish Widows
Green/Ethical Products
- Scottish Widows environmental and ethical investment funds
Ethical Lending or Insurance
No evidence of an ethical insurance policy found. However, Scottish Widows apply ethical screens to some of their investment funds.
Responsible Lending
1. Credit Lending
Scottish Widows offer between 60 and 85% LTV (loan-to-value) rates depending on the customer’s circumstances. This exceeds the FSA’s Turner Review suggestion that a maximum of 90% of a property’s price be loaned i.e. that borrowers should have at least a 10% deposit for a mortgage.
In terms of LTI (loan-to-income) rates, Scottish Widows offer single applicants 3.5 times their basic salary and 2.75 times to joint applicants or 3.5 times the higher basic annual salary plus the full amount of the lower. It will lend 3.5 times net annual earnings to self-employed applicants. These figures again correspond favourably with the Turner Review which suggests lending 3.5 times the annual wage of a single applicant.
The bank does not offer unsecured credit, for example personal loans.
2. Debt Warning
The bank runs a generic repossession warning for mortgage customers. No information as to whether the bank uses the FSA Debt Test or an equivalent system was found. This facility aims 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 difficulty.
3. Debt Management and Advice
No information regarding policies on payment default and handling payment problems was found.
The bank states that mortgage payment holidays/breaks and reduced monthly payments will be considered only if a Mortgage Reserve Account is in place. This means that normal monthly mortgage payments will be collected from this account instead of the customer’s bank or building society and that the balance on the Mortgage Reserve Account will increase and interest will be charged on that amount.
No information was found as to whether 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
The only provisions found for excluded customers are related to access for parent company, Lloyds TSB’s, banking customers.
Environment
The parent company Lloyd TSB's policy applies to all operations. This policy meets the two criteria in this area regarding energy efficiency and waste management and commitment to continued improvement. Additionally, while Scottish Widows publish no direct policy, they do outline their targets for environmental performance.
Carbon Neutral
Scottish Widows pledged to make its business operations carbon neutral by end 2007 and reduce total carbon emissions by 2012.
Equal Opportunities
Scottish Widows is covered by its parent company's policy which addresses the key criteria of gender, race, disability and sexuality.
Women on the Board
No data found.
Voluntary Standards & Initiatives
Charitable Giving
1% of pre-tax profits were donated to charity (2007).
Scottish Widows
- Life Insurance
- Pensions
- Investments
- Savings
- Mortgages
Scottish Widows
Scottish Widows
Customer Relations Department
15 Dalkeith Road
Edinburgh
EH16 5BU
