What are ethical mortgages, and who are the best providers in the UK?

If you follow ethical practices or lead an ethical lifestyle, you may be interested in ways to align your finances with your beliefs, such as the bank you use, your pension, or even your mortgage.

We look at what an ethical mortgage is and who the most and least ethical mortgage providers are.

What is an ethical mortgage?

An ethical mortgage is offered by a bank or building society focusing on ESG practices, including avoiding investing in areas such as fossil fuels and mining.

As the definition of ‘ethical’ can differ, so can the focus of individual mortgage lenders.

If you’re looking for a lender that aligns with your values, looking at how it operates, its transparency, where it invests, and the company’s accountability is vital.   

After all, your mortgage payments could end up funding controversial sectors that you don’t personally agree with.

While many banks and building societies offer mortgages, whether you’re moving or remortgaging, you may have less choice than you think if ethical practices are at the top of your list, as we’ll explore below.

What you should be wary of when considering an ethical mortgage

When looking for an ethical mortgage, it’s worth double-checking the bank or building society’s credentials.

For example:

• Does the company follow ESG principles?
• Have they had any negative publicity about any ‘unethical’ practices or investments?
• Are all of their financial products, such as pension funds, ethical?

Also, bear in mind that choosing a mortgage based on ethical practices may mean you don’t get the best rate for your unique circumstances. This means you could end up on a more expensive deal.

Talking to a mortgage broker could help you find the right deal that aligns with your values.

Who are the most ethical mortgage providers?

If you’re looking for an ethical mortgage, the Good Shopping Guide (GSG) has an extensive list of the best and worst ethical mortgage providers – how the GSG ranks them is outlined further below.

The benchmark for ethical mortgages is 75.

The following providers exceed this: 

While these are the highest-rated providers, none have been awarded the GSG accreditation, which means a provider has reached the ‘highest ethical business standard.’

Who are the least ethical mortgage providers?

Below is a list of the least ethical mortgage providers, according to the GSG:

There are many popular banks among the least ethical mortgage providers, including TSB (45), Bank of Ireland (45), Metro Bank (60), AIB (60), Virgin Money (65), Newcastle Building Society (60) and Atom Bank (65).

How does the GSG decide if a mortgage provider is ethical?

The GSG looks at various factors when considering its rankings, including: 

• Environmental: This consists of a mortgage provider’s environmental reporting. This looks at their environmental impact, goals, and progress (ideally with fixed targets). The GSG examines whether a bank or building society has been involved in harmful projects, if they are committed to reducing carbon emissions, and if they have been involved in a widely criticised project.
• People: This examines whether a mortgage provider has recently been involved in a project criticised by human rights groups or offered political donations.
• Other factors: This looks at whether the company has GSG accreditation, if they integrate ESG principles into their investments and avoid controversial ones, and if they have ‘mutual status,’ so they’re not targeting profit for shareholders. A clear ‘ethical ethos’ and the avoidance of unethical activities are also important considerations.

Need help finding a mortgage?

Whether you’re looking for a mortgage or hoping to remortgage soon, Unbiased can help quickly match you with a qualified mortgage broker.

A mortgage broker can help you find the right deal based on your unique circumstances and values.