Ethical lending to remain 'static'

Monday, 17 March 2008 12:00 AM

Ethical lending in the UK mortgage market is likely to remain "static" over the coming months, as the credit crunch continues to take its toll.

While banks and building societies have been tightening their borrowing criteria, with several higher risk products disappearing from the market, green lenders are unlikely to be forced from the market entirely.

That is according to MoneyFacts.co.uk, which argues organisations with these products are likely to be offering them as a part of their social responsibility policies, and are thus likely to remain in the market despite more restrained economic conditions.

Borrowers concerned with the ecological element of their finances are also unlikely to be discouraged, interested as they are in ethics rather than pure economics.

"We haven't seen a big change within the last four or five months toward lenders introducing green mortgages. But whoever was in the green mortgage market prior to the credit crunch will have a tendency to stay there," said Darren Cook, head of mortgages for MoneyFacts.

Lenders including the Co-Op and Norwich & Peterborough are presently active in the sector.

"The emphasis at the moment is on the underwriting and a healthy lending book. Lenders are looking at loan-to-value (LTV) rates and their criteria and so forth, to protect their lending book," continued Mr Cook.

"So the lenders who are in the green mortgage marketplace at the moment will probably continue, but I don't think there's going to be a big move towards additions to the market."

However, those looking to the green mortgage market may be taking an additional degree of risk when compared to the mainstream market, according to MoneyFacts.

"You might look at the economic side, the precise science of the cost of a mortgage, and make a decision based on your income stream and necessity," said Mr Cook.

"Or, you can decide ethically: 'I want to choose a green mortgage because that's the right thing to do'.

"You have consumers who are lifestyled in that direction and will morally take a green mortgage, because they believe that that's the right thing to do. But that's intangible; you can't really see the actual benefit."

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