Mortgages

In this guide we investigate, score and rank the ethical and environmental record of 37 mortgage providers.

We also look at the greenest options, switching mortgages, building societies, and give our recommended buys.

About Ethical Consumer

This is a product guide from Ethical Consumer, the UK's leading alternative consumer organisation. Since 1989 we've been researching and recording the social and environmental records of companies, and making the results available to you in a simple format.

What to buy

What to look for when choosing a mortgage:

  • Is it a building society? Building societies score far better in this guide than conventional banks. For a start, building societies are less involved than banks in financing damaging industries such as nuclear weapons, mining and fossil fuels.

  • Have you sought advice? Always consult an independent mortgage adviser before choosing your mortgage. A good place to find an adviser is unbiased.co.uk. Money Saving Expert explains more about mortgage brokers too, and Which? has a service for £499. 

Subscribe to see which companies we recommend as Best Buys and why 

What not to buy

What to avoid when choosing a mortgage:

  • Is it financing climate change? All of the big banks have extensive investments in fossil fuels, including the most damaging ones like tar sands and ultra-deep sea drilling. Also be aware of investments in the fracking industry.

  • Is it financing unethical industries? Some of the mortgages in is guide are offered by supermarket chains. Supermarkets score badly on our tables because of their involvement in many ethically troublesome industries, such as fossil fuels, apparel, and factory farming.

Subscribe to see which companies to avoid and why

Score table

Updated live from our research database

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Brand Score(out of 20)

Our Analysis

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 sectors around the world such as the fossil fuel industry.

You can read more about the big five banks and their controversial investments in our guide to current accounts.

The greenest mortgage

There is now only one specifically green mortgage available on the market, which is from the Ecology Building Society.

The Ecology Building Society provides mortgages which promote sustainable housing and communities. This can be for self-build energy-efficient housing, ecological renovation, improvements or conversion, or small-scale and ecological enterprises. It also offers mortgages for boat moorings, woodlands, and shared ownership housing.

Its innovative C-Change scheme offers homeowners discounted mortgage rates for energy-efficient homes. There are four levels of discount on a standard variable mortgage ranging from 0.25% to 1.25%.

The level of discount offered depends on the energy standard of the home, so the more energy efficient the home is, the bigger the saving you can make on your mortgage.

Other more ethical options

Building societies are seen as a more ethical option than banks due to the fact they lend mainly in the housing market rather than other more unethical sectors. You can read more about building societies in our guide to savings accounts

Building societies are also mutuals, which means legally they are owned and run for the benefit of their members, rather than shareholders. Not having to generate extra profit for shareholders also means building societies should be able to give customers better deals than banks do.

However, there have been criticisms that directors of many building societies are still helping themselves to large pay packets. Many are listed in our 2018 article on Director’s Pay. Only Nationwide paid its director over £1million, with a payment of £3.4m in 2016. It therefore got a mark in our Anti Social Finance category.

Many building societies ‘demutualised’ in the 1990’s, and become more like banks. Several former mutuals failed in the financial crisis, and others that were still mutual had to be taken over by other building societies or banks.

“They came unstuck due to excessively risky commercial and residential property lending funded by unstable wholesale funding – just as the banks did.” Luckily, restructuring after the credit crunch has “forced building societies to focus again on the core functions that too many had forgotten – long-term stable deposit-taking and prudent, good-quality mortgage lending”.

All the mutuals featured on the table above (including the EBS) pick up an additional mark in our scoring system for company ethos due to their more democratic structures. Mortgage customers are also members, and are able to vote to influence how the society is run.

However, there has been criticism that in practice, they are not all as democratic as they could be. According to the Building Societies Association themselves, “Several societies have introduced a “quick vote” option to their AGM voting form to make it easier for members. Here the member has to cross just one box, and the Board will be appointed to vote on the member’s behalf.”

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.

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 riskier financially.

Image: House made from bank notes

Company behind the brand

Lloyds Bank (not to be confused with Lloyds of London, which is an insurance firm – they are not connected) is the largest retail bank in Britain. It also owns Halifax and HBOS. 

Lloyds is now fully privately owned again; the government having sold its last remaining shares in May 2017. Lloyds claimed that the sale returned “£894 million more than the original investment”, but once inflation and the cost of government borrowing is taken into account, the public made a loss.

According to Don’t Bank on the Bomb, Lloyds made an estimated USD $2,686 million available to the nuclear weapon producing companies between January 2014 and October 2017. In common with the other big banks, it is still heavily invested in fossil fuels. 

Want to know more?

If you want to find out detailed information about a company and more about its ethical rating, then click on a brand name in the Score table. 

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