Home loan moan

There used to be two types of mortgage: repayment and interest-only. Interest-only mortgages - never very good for ethical consumers - have declined further in popularity following the slump in the stockmarket and endowment mis-selling scandals. This report therefore looks at the main suppliers of repayment mortgages.

Corporate control
The mortgage market is dominated by large PLCs, made up of the many mergers and consolidations among the retail banking sector and demutualised building societies.

The top six providers now account for two thirds of all mortgage sales.(3) One of the primary demands for ethical banking has been the notion that it is our own savings which are being used to fund environmentally and socially destructive projects around the world.

Although a mortgage is about borrowing money from these institutions, mortgages are still very profitable for banks, and consumers need to take some responsiblity for the activities carried out in their name.

Banks in this report have, for example, been criticised for lending to controversial dams in the Third World (Barclays, HSBC) and to companies involved in unsustainable logging (HBoS, HSBC, RBS).

Recently Lloyds TSB was criticised by the campaign group Global Witness, which published a report looking into the links between oil and arms in Angola. Lloyds had apparently been involved in setting up offshore accounts for some of the Angolan Government's oil revenues.(31)

Energy efficiency
In the UK, one quarter of all carbon dioxide emissions come from the energy we use to heat and light our homes, and power our household appliances.(7)

Barclays, the Co-operative Bank and Norwich & Peterborough Building Society offer free energy efficiency surveys with their mortgages. All Co-operative Bank mortgages also offer a free home energy report with the mortgage valuation, which details how energy efficient your home is and suggests ways you can improve it.(8)

Norwich & Peterborough offers a free energy survey with its Green Mortgage for Existing Properties. Its New Build Green Mortgage is only offered for new homes with SAP (Standard Assessment Procedure) ratings of 80 or more, or in respect of a property that you want to make more energy efficient, and does not come with a free energy survey.(9)

SAP ratings are a government initiative to encourage developers to build greener homes.

DIY
If you have not had an energy efficiency survey on your property you can contact the Energy Saving Trust. The Trust has a Home Energy Check which you can complete and return in exchange for a free home energy action pack and details of which grants you are entitled to and how you could save up to �200 per year on your fuel bills.

You can obtain the Home Energy Check and information on any grants you may be eligible for by contacting your local Energy Efficiency Advice Centre on 0800 512012.(11)

Ethical mortgages
Three providers specifically market ethical mortgages (Co-operative Bank, Ecology Building Society and Norwich & Peterborough Building Society).(2) Both the Co-operative Bank and the Ecology Building Society have strong ethical lending and investment policies.

The Ecology Building Society only lends on properties with an 'ecological payback' and this is inkeeping with the original objectives laid down by the society when it was established in 1981. It will lend on energy-efficient housing, ecological renovation, derelict and dilapidated properties, small-scale and ecological enterprise and low-impact lifestyles.

Both the Co-operative Bank and Norwich & Peterborough Building Society offer mortgages with 'carbon offsetting' features. Carbon offsetting has been popularised by businesses such as Future Forests, which, for a fee, will plant trees to offset your carbon dioxide emissions, supposedly neutralising any negative environmental impact.

However, the practice has been criticised by both Friends of the Earth and Greenpeace as being ineffective and detracting from real action on climate change.

The Co-operative Bank mortgages make payments to Climate Care annually for the life of your mortgage, to offset the equivalent of 20% of an average home's carbon dioxide emissions created from generating the gas and electricity used in homes.(5)

Norwich & Peterborough Building Society's Green Mortgage plants eight trees each year for the first five years of your mortgage in conjunction with Future Forests.(6)

Mutuals
Building Societies are mutual institutions run for the benefit of their savers or borrowers. Evidence from the annual reports of demutualised building societies shows that the extra costs of paying dividends to shareholders raises running costs by 35%.(4)

More importantly, there are some restrictions on corporate lending, so that mutually owned societies are less likely to be involved in financing arms deals or investing in oppressive regimes.(32) We have indicated mutuals with an M after the brand name on the table.

The Building Societies Assocation has a list of the 65 remaining mututal building societies. Some of the smallest only lend locally on housing, and so may be particularly appealing to those concerned about keeping finance within their local communities.

The BSA is at: www.bsa.org.uk, or on 020 7437 0655.

References
2 Co-op 29/05/03
3 Mintel, March 2003
4 www.bsa.org.uk/FAQ/new_faqs_1101.htm 03/07/03
5 www.co- operativebank.co.uk 02/07/03
6 www.npbs.co.uk 02/07/03
7 www.saveenergy.co.uk 03/07/03
8 www.co-operativebank.co.uk 02/07/03
9 www.npbs.co.uk 02/07/03
10 Ecology Building Society Newsletter, Spring 2003
11 EST 02/07/03
12 Ecology Building Society News, Spring 2003
13 Mintel, March 2003
14 Power Finance 31/01/02
15 International Rivers Network Press Release, 30/05/01
16 Hoovers UK, 05/06/03
17 Farm Animal Voice, 01/03/02
18 Ethical Consumer, 01/08/01
19 Labour Research, 01/06/02
20 CIS Report & Financial Statements 2002
21 Mintel, March 2003
22 Hoovers UK 05/06/03
23 Down to Earth, 01/03/1999
24 Hoovers UK, 06/06/03
25 Corner House Briefing, 01/06/99
26 Hoovers UK, 06/06/03
27 Who Owns Whom, 01/06/02
28 Lloyds TSB Group Annual Report & Accounts 2002
29 Mintel, March 2003
30 Global Witness: All the Presidents' Men, p.52, 01/03/02
32 Ethical Consumer April/May 2001