Lenders linked to ethical criteria

For most people, it is enough of a hassle buying a home without thinking about the ethical stance of their mortgage provider. However, as ethical money plays an increasingly important part in people's lives, ethical home loans are easier to come by.

Like ethical investments, lenders take a stance on ethical investments which, for example, range from a lighter shade of green in the case of Norwich & Peterborough, to a darker, brighter shade with the Ecology building society

The Ecology Building Society and the Norwich & Peterborough Building Society are the main players in ethical mortgages, but the Co-operative Bank also introduced a green mortgage to its ethical product range last year.

The Ecology Building Society only lends on properties which give what it calls "an ecological payback".

This includes: old houses in need of renovation; new homes built with recycled or sustainable materials; or homes which will be made as energy efficient as possible.

If you have your heart set on doing up an old country ruin, for example, then the Ecology Building Society is probably your lender.

"It's very easy to get a mortgage from us. Our lending is based on the property and not the individual," says George Penaluna of the EBS. "We base our decision on whether lending to on the property will generate an environmental benefit.

"Most lenders won't lend on derelict properties. They are concerned about what to do if a borrower defaults on his or her repayments. Whereas the lender would usually repossess the property and sell it for funds, the property could feasibly be worth less than when it lent money in the first place.

"We can minimise this risk as we're a small organisation and can go into the financial planning and budgeting aspects with potential borrowers on a one-to one basis to make sure the project is financially sound."

As renovations progress and the value of the property increases, the EBS may provide funds for further improvements.

Norwich & Peterborough offers what it calls a carbon neutral mortgage. The building society will plant eight trees a year over five years for every home bought or re-mortgaged with its green mortgages.

The trees, it says, will absorb the carbon dioxide emissions produced by the property, making it carbon neutral.

Norwich & Peterborough will also give you a discount on its standard rate if you improve the energy efficiency of your property. And, if you're buying a new home, it has a standard assessment procedure which rates the greenness of a property.

The Co-Operative Bank launched its green, CAT-standard mortgage last year. CAT stands for cost, access and terms and means the mortgage meets a minimum set of criteria defined by the government.

"When a mortgage is taken out, the bank will meet the first ?200 of the customer's legal costs, and the entire cost of the valuation," says a Co-op representative. "As part of the valuation, the customer will also receive a detailed energy report, which will cover the efficiency of the property and suggest ways in which its energy consumption can be improved."

For each mortgage taken out, the Co-op will also make an annual payment to Climate Care, a scheme aimed at tackling global warming.



Details of the products:


Ecology BS
Rate: 6.5%
New borrowers benefit from a 0.5% discount in the first year and, after four years, all borrowers get a 0.25% discount for the remainder of the term.
Loan-to-value (LTV): 80% or 90% on renovations (first-year discount does not then apply)
Redemption penalties: three months' interest in the first four years.


Norwich & Peterborough BS
New Build Green mortgage
Rate: 5.24%
LTV: 95%
Redemption penalties: three months' interest in the first four years.


Co-operative Bank
Rate: 5.69%
(LTV up to 75%)/ 5.89% (LTV over 75%)
For borrowers borrowing up to 75% LTV the interest rate is 4.49% for the first six months; for those borrowing more than 75% LTV, 4.69% for the first six months
LTV: max 95%
Redemption penalties: none