Co-op energises mortgage market

Co-operative Bank is to extend its ethical stance on financial products to include mortgages. It is planning a nationwide marketing push for home loans, which will offer free energy checks and will include as part of the deal a contribution from the bank towards fighting global warming.

The bank, which yesterday announced its 15th consecutive rise in profits, is to start advertising the ethical mortgage after a trial with a select group of customers.

Describing the mortgage as "one of the best around", Co-op's chief executive Mervyn Pedelty said the standard variable rate was set at 5.69% and would offer a discount of 1.2% for six months. Co-op's mortgage undercuts Halifax, the UK's biggest mortgage lender, which has a rate of 6%.

Mr Pedelty said Co-op was reaping the rewards of its stance on ethics, which he said was embraced not only by customers but also by employees. "We are seeing a rise in corporate responsibility. We were the trail blazer," he said.

The bank's ethical policy is devised by its own customers who fill in questionnaires about their views on certain topics ranging from animal testing and genetic engineering to arms testing.

The bank, part of the revamped Co-operative movement, made a £60m profit in the first six months of the year, up 9%, allowing it to claim that profits had nearly doubled since 1997.

Its provision against bad and doubtful debts rose to £35m from £30m in the same six months of last year and, given the "unusual" business climate, the bank said it had "adopted a more cautious lending policy".

Even so, its loans to companies rose 31% during the period, although personal loans rose at a slower 12%, to £112m.

The bank has begun piloting ways of pricing the loans it makes to customers according to their individual credit risk profile - a practice which other lenders such as Barclays have adopted. It also runs smile, the internet bank, which advertises on bananas.

Co-op admitted that the average balance on its credit card has fallen by 5% because it had stayed out of the war for customers by refusing to offer what it called "unsustainable loss-leading rates".