The market for ethical and green mortgages is relatively small, partly because consumers have been more concerned about what they invest in rather than who they invest from, and because the building societies have traditionally had housing only related investments. In recent years most major banks have started to take their social and environmental responsibilities much more seriously and there are a few lenders, detailed below, who lead the way in ethical mortgages. This is a growing market, as more lenders realise the demand for "carbon neutral" products and ethical criteria are increasingly being applied.
The average home produces 5 tonnes of CO2 each year. According to Climate Care, this costs approximately £40 per annum to offset with tree planting. However, there are lenders who will pay for and organise offsetting on your behalf if you take out a mortgage with them.
As part of its eco-mortgage, the Co-operative Bank makes an annual donation to Climate Care to offset around 20% of an average home's carbon dioxide production for every year the mortgage is held. Climate Care is an organisation which aims to help combat global warming by reforestation, and other renewable energy and energy efficiency projects. Through the Co-operative Bank's eco-mortgage new woodlands are being created in Uganda. The Co-operative Bank's ethical policy also means that it will not invest in companies that avoid "repeated damage to the environment". It will also avoid any company that "as a core activity, relies on: the extraction or production of fossil fuels, ...the manufacture of unnatural chemicals which may contribute to problems such as ozone depletion, ..... ,or the unsustainable harvest of natural resources such as timber clearance, which leads to deforestation.". With each valuation, the Co-op Bank will provide a free Home Energy Rating, detailing a building's energy efficiency and potential energy saving measures. For more information see www.co-operativebank.co.uk.
Norwich and Peterborough Building Society
The Norwich and Peterborough Building Society offers a 'Green' mortgage for energy efficient homes, this mortgage is linked to a reforestation scheme aimed at making the homes Carbon Neutral, and their 'Brown' mortgage for people who wish buy a property to restore or convert rather than using a greenfield plot. The Society offers green mortgage products available for new homes or in respect of a property that the borrower wants to make more energy efficient. For the first five years of each "green" mortgage, eight trees will be planted each year. This aims to make the home "carbon neutral", whereby the estimated emissions of carbon dioxide (CO2) from the home are offset by the estimated absorption rate of CO2 by the new trees. The Norwich and Peterborough Building Society works with an organisation called Future Forests Ltd. which aims to help offset the damage done to the environment by businesses and individuals. Future Forests and its planting partners plant and maintain new forests or add to existing forests, arrange to measure carbon uptake, and develop carbon management programmes. Norwich and Peterborough forests will be created in East Anglia and Lincolnshire as a result of customers taking out these "green" mortgages, but borrowers may request that a tree be planted elsewhere in the UK if they wish. For more information see www.norwichandpeterborough.co.uk.
Ecology Building Society
The Ecology Building Society is a small, specialised mutual building society dedicated to improving the environment by promoting sustainable housing and sustainable communities. It lends on the grounds of the building, rather than the individual. It only provides mortgages to those whose plans will be of benefit to the environment. The Ecology provides mortgages for energy efficient housing, ecological renovation, derelict and dilapidated properties and small-scale and ecological enterprise such as organic farms. These criteria ensure that those who save with it know their funds are being used for ecological benefit. It says borrowers do not have to be 'green' to get an Ecology mortgage. Many of its borrowers have environmental concerns, and others simply want to rescue a derelict property to make into their home. Many lenders refuse to lend to renovation projects, but The Ecology can consider lending on a derelict property, providing the renovation project is financially viable. The Ecology specialises in renovation and new build mortgages on properties and projects that respect the environment, and is particularly interested to see derelict and dilapidated property brought back into use.
Its latest product, the C-Change mortgage discount, is designed to help homeowners with the cost of increasing the energy efficiency of their homes. Any mortgage funds used to install energy saving measures, such as insulation, triple glazing and renewable energy systems - such as solar panels or wind turbines - will benefit from a 1 per cent discount from the standard variable rate. All Ecology's residential mortgages are variable rate mortgages, benefiting from daily interest and a 0.25 per cent discount after two years on funds that do not qualify for the C-Change discount. For more information see www.ecology.co.uk
Our Ethical Mortgage Advisory Service
At Axxis Financial Planning, we have developed a mortgage advisory service to cater for the needs of the ethical investor. The service has proven extremely popular with existing clients and has attracted many new people to ethical mortgages for the first time. Many clients have benefited from both the Mortgage and Remortgage service.
The primary consideration when selecting an ethical mortgage is the ethical credentials of the lender. This can vary widely. Lenders that operate wholly to social and environmental criteria are very selective about the types of properties on which they will lend. The average home in the UK would not qualify for a loan from lenders in this category. Common properties on which loans are made are the renovation of derelict buildings, smallholdings, and environmentally sensitive new-build properties. Other lenders operate either an ethical policy in respect of their own activities, or apply some form of social or environmental criteria to their loans. Lenders with an ethical policy run their businesses according to an ethical code of conduct. Where they have corporate customers, the ethical policy will exclude companies operating in certain areas (such as weapons manufacture or causing environmental damage) and support companies that are improving their social or environmental impact. Other lenders with environmental criteria will offer special mortgage terms or discounts to borrowers that meet certain environmental standards on their property. This encourages homeowners to minimise the impact of their home on the environment, by conserving energy and in the use sensitive materials.
The fact that many lenders are mutual societies (owned by the clients, not shareholders) is seen by many as an ethically positive factor. At Axxis, we see the mutual status of a Building Society is a positive ethical attribute. The variety and cost effectiveness of mortgage products offered by mutual Building Societies who do not have to pay shareholder dividends are all issues to take into account. Very often, rates on offer from mutual societies are better value than those on offer from High Street banks. There are quite a number of differences between the High Street banks when their social and environmental impact is compared. Some of the banks contribute significantly more to society that others, via charitable foundations, and some of the high street banks apply comprehensive environmental criteria to their corporate lending.
Our aim is to find the most appropriate mortgage for your needs. By understanding the social and environmental impact of all lenders in the UK, we can work with you to find a lender that you are ethically comfortable with, and a mortgage interest rate which offers good value.