If you're looking for an ethical mortgage, finding a lender that aligns with your principles can sometimes feel challenging with the different definitions of "ethical" available.
Here we'll cover how you can find the right lender for your specific needs and moral compass. We'll also explain the difference between lenders that simply offer green mortgages and those that operate to strict ESG (Environmental, Social, and Governance) or religious practices.
What is an ethical mortgage lender?
The term ethical can mean different things to different people, depending on their personal ethics. Some people may see green mortgages as ethical as they encourage energy efficiency, for example. However, not all lenders that offer green mortgages operate to ESG practices.
Lenders who operate ESG practices, prioritise the treatment of the environment, animals, and people. They would likely avoid investments in areas that cause harm, such as fossil fuels, mining, and arms sales. Building societies are more likely to be considered ethical than banks in this regard, as they don’t operate to make a profit for shareholders or borrow money from outside sources, like banks.
For some borrowers, ethical lenders may be those religious lending institutions that align with their core belief system. For example, sharia mortgages, which allow muslims to purchase a house without paying interest, which is considered haram in Islam.
Which lenders offer ethical mortgages?
These lenders may be considered ethical due to their ESG practices, charitable or religious affiliation. This is not an exhaustive list, and the term ethical will vary by borrower:
1. Ecology Building Society
Ecology exclusively offers finance options to sustainable and environmentally friendly properties and building projects. While you can use them to purchase pre-built eco-friendly homes, they specialise in green building projects for those wanting to fund self-build projects or renovations to a high environmental standard.
2. The Co-Operative Bank
While the Co-Op operates as a bank, not a building society, they have a similar customer-led policy, which is similar to a building society member-centric model. The 3 pillars of their ethical policy are people, planet and community. They produce an annual sustainability report for full transparency.
3. Triodos Bank
While not strictly a mortgage lender, Triodos is an ethical bank offering ethical property finance of up to £20 for land purchases and nature-based development projects. They will not lend to any organisation who puts profits before people or the planet.
4. Reliance Bank
Reliance Bank is owned by the Salvation Army, and donate 75% of their profits to support their charitable work. While affiliated with the Protestant Christian Church, they offer finance to any projects that have a positive social impact. They offer both residential and Buy-to-Let mortgages, but favour ethical landlords.
5. Kingdom Bank
Kingdom Bank is a Christian bank which exclusively lends to churches, Christian charities and Christian workers, such as missionaries. While they don’t lend to members of the public, they do offer standard residential mortgages to Christian ministers and similar employees of the church.
6. Coutts
Although exclusively a high-net worth lender, Coutts integrates environmental, social, and governance (ESG) factors as a core component of its investment strategy. They are a certified B-Corp lender, offering both residential and commercial finance for multi-million pound property purchase.
7. Gatehouse Bank
Gatehouse Bank is a Sharia compliant lender offering Home Purchase Plans (HPPs) to both muslim and non-muslim customers. They operate ethical and ‘socially responsible’ banking policies and provide an annual sustainability report. They are also certified carbon-neutral.
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Who are the best ethical mortgage lenders?
As you will see from the list above, there are a broad range of lenders that you may consider ethical, depending on your own personal set of ethics. The best ethical lender will therefore be those offering the most suitable product for your needs, whilst operating within your personal set of morals.
If you have specific concerns related to the ethical soundness of your borrowing, speak to one of our team and we will do our best to match you with a property finance firm who operate within your moral compass.
How to choose the right lender for your ethical mortgage
Whether you’re looking for a green mortgage, to borrow from a lender who prioritises ESG, or that has a specific religious affiliation, we can help you find the right lender for your individual needs.
At Money Helpdesk we understand that mortgages are not a ‘one size fits all’ product. As well as different financial circumstances, each borrower has their own idea of acceptable conduct. Many borrowers are becoming more aware of unethical banking practices, and don’t want to contribute to their profits. No matter what’s important to you, we’ll prioritise your preferences when we search the whole market for the most fitting property finance product for you or your business.
Get started today to speak with one of our knowledgeable brokers.
FAQs
Many lenders now offer green mortgages, and while the actual product has an ethical intent, not all lenders offering them can be considered ethical in their practices.
Ethical is also a relative term, so what one borrower may consider ethical, another may not. While the mortgage market in general tends to refer to lenders operating ESG practices to be ethical, individual borrowers may have a broader definition of the term.