Bank on something better

 The Ethical Consumer research team looks at mortgages without ethical compromises.

Banks and the arms trade

Mortgages are usually the biggest financial ‘product’ that most people ‘buy’.  As such they can be particularly lucrative for the banking industry – giving them ever more resources to invest in problem areas around the world.

One particular target area for civil society criticism has been the role big banks play in financing arms manufacturers and their international transactions.  For some people Santander, a relatively new player in the UK market, is not necessarily immediately associated with these kinds of issues.  However there is now a new Spanish website detailing its extensive investments in “bombs, missiles, nuclear weapons and depleted uranium.”

As the full score card shows (click on 'More Detail'), none of the big five lenders have chosen to avoid offering finance in this – and many other areas – for ethical reasons.

Switching mortgages

It is possible to switch mortgage provider in the middle of a mortgage period.  Normally this is done for financial reasons, but could be done for ethical reasons too.  It may involve up-front costs such as having a property surveyed again.

Which? suggests that people should seek professional advice before they take on a new mortgage or make a decision to switch.  They have their own mortgage advice service, or suggest that an independent one can be found at unbiased.co.uk.  Many of the most financially rewarding deals available though are only available by going to a lender direct.
Whether switching, or as a first time buyer, ordinary repayment mortgages are always best from an ethical point of view.  Interest-only or ‘endowment’ mortgages, of which there has been much mis-selling in previous years and which rely on stock market investments, will always be problematic ethically – as well as risky financially.

Which? top six recommended mortgage providers for value and service in January 2012 were:  First Direct, Co-operative Bank, Yorkshire Building Society, Britannia, HSBC and Nationwide.

Green mortgages

Since we last reviewed mortgages, specifically green mortgage products from the Co-operative or Norwich & Peterborough are no longer available.  This leaves the field open for the excellent Ecology Building Society (EBS).

The EBS provides mortgages which promote sustainable housing and communities. This might be through energy-efficient housing, ecological renovation (recycling) of run-down properties, small-scale and ecological enterprises or low-impact lifestyles. Its innovative C-Change scheme offers home-owners discounts off their mortgage rates for energy-efficient homes — the higher the energy rating, the higher the discount.

It has also recently launched mortgages for energy-saving improvements in existing homes.  These might include installing insulation or renewable generation technologies.
They are also a mutual society which you allows you to become involved in the direction of the organisation.

Other building societies

Nationwide Building Society is the UK’s biggest – with more than four times the assets of its nearest rival. It receives a worst ECRA rating for environmental reporting and has subsidiaries in two tax havens.

Yorkshire Building Society now owns Barnsley Building Society, Chelsea Building Society and Norwich & Peterborough Building Society.  It picks up a mark from Norwich & Peterborough which was found to have mis-sold investments from Keydata in 2010.(1)  It closed down its Guernsey subsidiary on 2010.

Newcastle Building Society loses marks for its tax haven operations and its poor environmental reporting. Skipton Building Society also has a subsidiary in Guernsey, a tax haven.

Coventry Building Society, Cumberland Building Society, Principality Building Society, Skipton Building Society, and West Bromwich Building Society, all lose one mark for scoring worst on environmental reporting.

Mortgage Facts

• The banking crisis has seen net mortgage lending fall by 93% between 2007 and 2010.
• The average deposit required by lenders has increased from 17% in 2007 to 27% in 2010.
• The top six mortgage providers (big 5 plus nationwide) accounted for 72% of all mortgage lending in 2010.

Source: Mintel Mortgages April 2011

References  1 BBC News Website 19/8/10 Keydata: Couple win compensation from building society.