Ethical Mortgages

Finding an ethical mortgage 

Buying a home is generally the single biggest investment for most people, and therefore making an ethical choice around the mortgage lender is important. Unfortunately, the need for most of us to borrow large sums of money in order to finance a house purchase creates a lucrative opportunity for the banking sector – the profits from which might end up invested in harmful industries such as fossil fuels or arms. 

The good news is that there are plenty of ethical mortgage providers. And many of their mortgage products are also just as affordable, if not more so, than products from conventional banks.

We also look in detail at what green or eco mortgages are, including the different types of green mortgages such as retrofit mortgages and mortgages for energy efficient homes. Green retrofit mortgages for activities like installing insulation and solar panels tend to fall into two categories: mortgage providers offering additional borrowing and those providing cashback (often smaller amounts). We outline which providers currently offer these different types of green retrofit mortgages, along with some other lending options for making eco house improvements.

This mortgage guide rates 34 brands of mortgage providers. With 10 Best Buys, along with smaller building societies we were unable to include in the guide, there will hopefully be a suitable green and ethical mortgage provider for you.

What is an ethical mortgage?

Ethical mortgages, along with other ethical financial products such as savings accounts and current accounts, have several elements that make them stand out as ethical. These tend to be focused around environmental, social and governance issues (often referred to as ESG), and include:

• lending policies of the provider which exclude certain harmful or unethical industries, such as:
  • nuclear weapons
  • other arms or military equipment used for oppression
  • fossil fuels
  • tobacco
  • animal testing
• transparency of lending and investment policies and practices
• provided by a company which doesn't appear to have complex tax avoidance practices, and is possibly certified by the Fair Tax Foundation
• ethical provider who prioritises fairness without excessive high pay at the top
• provider whose ethical values align with yours
• an ethical provider whose focus is its members rather than increasing profit for its shareholders, such as building societies and credit unions

By contrast, unethical mortgage providers are likely to be not very transparent about their lending policies, are likely to be investing in fossil fuels, may be making large tax savings through complex tax arrangements, and pay their CEOs huge salaries and bonus packages. 

In this guide to ethical and green mortgages we have rated the providers on a range of important ethical topics, such as those outlined above, including:

• lending policies and practices
• climate and environmental responsibility
• tax avoidance
• company ethos

Why are building societies a more ethical choice?

According to the Building Societies Association, building societies currently hold around a quarter of the total mortgage market share. But that means that most mortgages are supplied by banks, led by Lloyds and NatWest.

Nationwide Building Society is the third biggest mortgage lender in the UK. As our score table clearly shows, building societies consistently out-perform most of the banks when it comes to ethics, with all of the building societies scoring higher than any of the mainstream banks, bar the Co-operative Bank.

This is mainly because they do not lend or invest in the same way as banks.

Regulations stipulate that at least 75% of a building society’s assets must be held in residential property mortgages, so they are much less likely to be lending to companies with dubious ethical records. So far as we can tell, some may do a little lending to companies, but almost always to smaller businesses to buy commercial buildings in their local areas.

With Nationwide recently buying Virgin Money, and Coventry Building Society buying Co-op Bank, this is set to change a bit, in that both groups will be doing some business lending in the future. Early indications are that strong ethical business policies at the Co-op, and hopefully forthcoming at the Nationwide too, will mean that they continue to score highly in our guides.

According to Which?, building societies also offer below-average rates to first-time buyers who have a 5% or 10% deposit. (This is a good thing, as higher interest rates mean higher repayments.)

They also found that the bigger building societies did better on customer service than the banks. In a survey of 22 banks and building societies by Which?, only three providers received five stars for overall customer service, and all were building societies: Nationwide, Skipton, and Yorkshire.

All three also achieved full marks for their transparency on charges and penalties, and each was named a Which? Recommended Provider.

Why are green mortgages important?

As we say in our annual Climate Gap reports: "Heating accounts for about 14% of UK emissions, and over three quarters of that is from homes. Our homes are among the worst insulated in Europe."

With poor leadership from government, progress on this has been embarrassingly slow. Our 2024 Climate Gap report noted how Climate Action Tracker had said that to meet net zero plans for 2050, "governments need to move to emergency mode and strengthen the ambition of their 2030 targets and current policy action."

Because decarbonising UK homes by 2050 is a mammoth task requiring an estimated £250bn, many professionals agree that this will require both public and private investment. And the mortgage industry is viewed as crucial in encouraging homeowners to prioritise energy efficiency, whether they are purchasing a new home or upgrading an existing one.

This means that, since our last mortgage guide in 2023, there has been quite a lot of activity developing the “creative funding instruments” that our Climate Gap Reports argue are needed.

Growth in green mortgage market

According to the Green Finance Institute, green mortgages have grown from 4 products in 2019 to 61 in 2024. Only some of this is being driven by environmental idealism. 

Other factors driving growth in green mortgages include rising costs of energy bills (possibly affecting your ability to meet your mortgage repayments), and low EPC ratings which are beginning to affect the value of inefficient properties.

What are green mortgages?

There are a variety of different types of green mortgage but they fall into two main groups:

1. Green retrofit mortgages

These allow existing homeowners to borrow more money at (sometimes) attractive interest rates to install or “retrofit” things like insulation, heat pumps and solar panels. 

We think that this type is more likely to directly drive change so we have looked at them in more detail below.

2. Mortgages for energy efficient homes

These will give you better interest rates on your mortgage if the house you want to buy (or if you are remortgaging) is already EPC rated A or B. We think this might indirectly drive some change by depressing the price of lower-rated homes over time, thereby persuading existing owners to upgrade before they sell. The Money Saving Expert website currently lists some of the providers offering this second type of green mortgage. The highest rated of these in our own guide are Co-op Bank and Nationwide.

Green mortgage products of both types are coming and going quite quickly at the moment, which is why we have not tried to list them all here. This complexity can mean that, as well as reading Ethical Consumer Magazine (!), consulting a mortgage broker may be wise.

Who offers green retrofit mortgages?

We looked at all the lenders rated on our score table to see who was offering green retrofit mortgages. The ones we found tended to fall into two main types: 

• Building societies offering additional borrowing arrangements
• Banks offering cashback arrangements.

All these were for people who were already mortgage customers, though in theory it would be possible to switch provider to access some of them.

1) Additional borrowing green mortgages

In our guide, the following building societies currently provide additional borrowing green mortgages.

Coventry Building Society (Green additional borrowing)

A lower rate for energy efficiency improvements for customers with buy-to-let or residential mortgages. Customers can borrow up to £25,000 and must spend at least 50% of the money on energy efficiency improvements.

Nationwide (0% interest Green Additional Borrowing mortgage)

0% fixed interest for the first two or five years for borrowings between £5,000 to £20,000, then onto their standard rate thereafter. 100% of the loan must be used to make energy efficiency improvements.

Skipton Building Society (Green additional borrowing)

Borrow between £5,000 and £50,000 depending on your individual circumstances. At least 50% of the amount borrowed must be spent on energy efficiency home improvements.

Ecology Building Society (C-Change discount)

Ecology's arrangements are a bit different to the others, and this is its specialist area. While the mortgage rate from most providers tends to rise at the end of a deal, the C-Change discount can see borrowers’ rates reduced by up to 1.5% once they've completed energy efficiency work. Available to new and existing borrowers.

2) Cashback green mortgages

Of the brands in our guide, the following banks and building societies currently provide cashback green mortgages.

Barclays (Greener Home Reward)

People with a residential mortgage with Barclays can claim up to £2,000 cashback after providing evidence of installing low-carbon heating or solar energy products. From an ethical standpoint, however, Barclays is a brand to avoid.

Halifax and Lloyds (Green Living Reward)

Offers up to £2,000 cashback for heat pumps, solar, or insulation, and a free EPC home energy rating.

Virgin Money (Virgin Retrofit Boost Mortgage)

Cashback arrangements of up to £15,000 which must be spent on energy efficiency improvements. Available exclusively via intermediaries for both residential and buy-to-let purchase and remortgage customers.

Ecology Building Society

Borrowers can claim £500 cashback when they install an air source heat pump and £1,000 for a ground source heat pump. Available on their new residential mortgages for: self- and custom-build, renovations, conversions, and shared ownership.

Other ways to borrow for retrofit

It is worth noting briefly that adding to a mortgage is not the only way to borrow for energy efficiency retrofits. There are a range of businesses and options that have popped up over the last couple of years doing similar things with various types of secured and unsecured loans.

One of the most interesting is Lendology, a community interest company that works in partnership with some local authorities. If there is one in your area, you can borrow for a variety of schemes targeting a range of housing challenges, including empty properties, energy efficiency standards, safety in later life, and renewable energy improvements.

Another is Tandem, a decently scoring bank in our guides which has a scheme for Home Improvement Loans for Greener Living. We even found a credit union (South Manchester Credit Union) doing loans for retrofit. There may be others.

There are also some specialist commercial lenders including Perenna and Propensio and some retrofit installers who can arrange finance too.

The impact of retrofit lending schemes

Despite all this innovation, anecdotal evidence suggests that uptake has been slow. There are a whole variety of reasons for this, not least a chaotic political environment and inconsistent approach to subsidies. Other people we have spoken to have mentioned "unhelpful negative tabloid reporting of the costs and benefits of heat pumps and other technologies."

This means that the best lenders also have comprehensive customer education programmes around the net-zero transition too. These days, most lenders will have tips on their website for clients to make their homes more energy efficient. Unsurprisingly, the more a lender had to offer, the more engagement we found.

The Ecology Building Society, for example, involved its membership in shaping its 2030 Strategy which sets out the Society’s wider ambitions for a sustainable future.

In addition to educational programmes, we like to see lenders collaborating to put pressure on governments to get this stuff right. Nationwide's Green Homes Action Group is just one example of this.

Finally, it’s also worth noting that others have been calling for much greater ambition and innovation in this area. In January 2025 the New Economics Foundation called on the government to introduce an interest-free loan scheme, backed by the Bank of England, to help middle-income households afford the necessary upgrades to their homes.

Finding an ethical mortgage broker

Navigating the world of interest rates, fixed-terms, and repayment options can be a bit overwhelming – especially if you are also thinking about the ethics of your mortgage!

You don’t have to use a mortgage broker, but they can help make the process of finding the right mortgage a lot simpler. Indeed, 84% of all mortgage transactions are now apparently completed by a mortgage broker.

There are a huge number of brokers in the UK, and there are also multiple mortgage broker directories listing them. It was not within the scope of this guide to rate all of them or provide recommendations on that basis. Finding a local mortgage broker can be done, for example, through unbiased.co.uk or vouchedfor.com.

We’ve only found a handful of mortgage brokers that market themselves as ethical, and even then we’ve not seen evidence of how they are ethical. One company, WR Ethical, indicated on its website that its “work uses Ethical Consumer data to let you know about the impact of your mortgage options.” 

Whether they market themselves as ethical or not, you can easily ask any broker to restrict their search to some of our Best and Recommended Buys.

With the recent growth in green mortgage products there are more brokers showing awareness of this area too. The Green Finance Institute has just introduced a training course on the subject and the Association of Financial Intermediaries has also set up a website with more information for advisors too.

Rating banks on their lending polices and practices

One of the most significant things that banks and other financial institutions do is lend money to individuals and businesses.

We have researched and created a new special rating to assess financial companies' lending policies in more detail. Our two new categories are 'lending policy' and 'loans & investments'.

These ratings looks at what policies banks and building societies have around their lending, and how transparent they are about who they lend to. We research not only what is in their policies, but also what they actually do in reality. 

We looked at whether banks and building societies disclose their loans, and exclude lending to certain sectors. The most ethical banks and building societies will exclude sectors or activities which are unethical. These sectors range from fossil fuel extraction to armaments to the exploitation of animals.

The majority of building societies’ lending is to people, while banks have a much wider portfolio and tend to also lend to companies. And, unless they have a detailed and extensive ethical policy, like the Co-op Bank does, banks often lend to companies that operate in particularly harmful sectors.

The amount banks lend to individuals is often dwarfed by the amount they lend to companies. Since banks’ corporate lending practices essentially shape our future, Ethical Consumer rated banks and building societies on their commercial lending and investments. We also wanted to know about ethical policies regulating their corporate lending.

Lending policies performance

Most of the banks scored very poorly in this category because they don’t disclose (so are not transparent) or exclude (so are likely to be funding unethical activities). 

Most banks scored between 0 and 30/100 points for this category. Exceptions to this were Co-op Bank, Gatehouse, Kent Reliance, and Tandem Bank.

In contrast, even the lowest scoring building societies scored 60/100 with one even scoring full marks.

Financing fossil fuels

In order to keep global warming under 1.5°C, companies need to drastically reduce their carbon emissions. Yet since the 2015 Paris agreement, the worst 12 banks – of which three, Barclays, HSBC, and JP Morgan appear in our finance guides – poured US$3.3 trillion into the fossil fuel industry.

Other banks in this mortgage guide listed as financing fossil fuels were Danske, Lloyds, NatWest, and Santander.  

All of these companies scored 0/100 in our climate category. None of our Best Buy and recommended mortgage companies financed fossil fuels.

Financing nuclear weapons

At a time when nuclear war is a frighteningly realistic threat, the latest Don’t Bank on the Bomb report found that between January 2022 and August 2024 financial institutions had provided US$784bn to the top 24 nuclear weapons producers.

Six of these finance companies appear in this mortgage guide: Barclays, Danske, HSBC, Lloyds, NatWest, and Santander. 

None of our Best Buy and recommended mortgage companies financed nuclear weapons.

Our separate feature article on banks and arms has more information on which banks are funding weapons, along with an additional feature on which banks are more complicit in funding Israeli abuse of Palestinian human rights.

Financial institutions and tax conduct

Building societies are less likely to use tax avoidance strategies. Only three of them – Nationwide, Newcastle, and Skipton – were marked down in our tax conduct column.

These three all owned companies based in the Channel Islands tax havens, but for Skipton and Nationwide it seemed to be for legitimate reasons, while the reason was less clear for Newcastle.

Meanwhile all the banks lost points for their tax conduct, with the exception of Co-op Bank, Kent Reliance, Paragon, and Tandem.

Islamic banks and mortgages

Islamic banks follow Shariah law which requires that, for a financial product to be considered Halal, or permitted, no interest is charged on it. In the most common Islamic mortgage scheme, the Home Purchase Plan (HPP), the borrower purchases a certain percentage of the house and the mortgage lender purchases the remaining percentage. The monthly payments to the lender then consist of part capital, part rent, and part charges. These payments contribute to the gradual buying of the whole property from the mortgage lender.

As the money is made through rent and charges rather than interest this is seen as Halal by many Muslims.

In this guide we rated the two largest Islamic banks in the UK, Al Rayan and Gatehouse Bank.

They both claim that they provide ethical banking. This is due to the fact that Islamic law requires them to avoid transactions in certain industries such as arms, gambling, tobacco, and pornography.

The two providers of Islamic mortgages on our table, though not as high scoring as any of the building societies, do considerably better than the mainstream banks.

Alternative housing options

Renting is not a positive experience for many people in the UK with ever-increasing costs, low-quality housing, and unresponsive landlords. It’s not surprising that many people hope to move on to home ownership. But with that goal becoming increasingly inaccessible to many, it might be worth considering some alternative options.

Co-housing and housing co-ops offer a middle ground between renting and ownership that can work really well. 

How do housing co-ops work?

Housing co-ops essentially work by making you both a tenant and a landlord. The house or houses are owned by a registered co-operative which manages it. The membership of the co-op is comprised of whoever is living in the housing.

This puts people in control of their own rent and maintenance, which can often mean lower costs and better living conditions.

Housing co-ops come in all shapes and sizes. They can be a group of people living in a single property and united by a set of common values and beliefs, or they may be comprised of separate private living spaces occupied by a variety of different people.

Co-housing projects are a collection of private dwellings but with some shared spaces to encourage a strong community. 

Can you get a mortgage to set up a housing co-op or social housing?

You can indeed set up a housing co-op with a mortgage. This may be a more accessible route to better housing for those on a low income because the mortgage won’t be based on just your own finances.

Radical Routes is a network of housing and worker co-operatives that are working for radical social change. They have various resources and a wealth of experience on how to set up a housing co-op. Realising that “most conventional banks are not prepared to lend to the kind of project we aim to support”, they have set up an ethical loan fund. This innovative loan fund is not run for profit and is controlled by its users (the borrowers).

According to Radical Routes, getting a mortgage is one of the final steps to setting up a housing co-operative. You can find full details of the steps they outline as well as further information by visiting the Radical Routes website. 

And while conventional banks are indeed disinclined to provide housing co-ops with mortgages, there are a few that encourage them.

One of these is Triodos Bank, which doesn’t offer mortgages for individuals so it’s not in this guide, but it welcomes housing co-ops. On its website, Triodos says: “With us, you benefit from a long-term relationship with a partner genuinely committed to the social and affordable housing sectors, and knowledge of the issues you face.” You can even get capital-raising advice from their corporate finance team.

In February 2025, Harrogate Housing Association announced that it had raised £15m of new loan funding from Triodos to create 200 new affordable and sustainable homes in Harrogate. These new homes, adding to the association’s 300 existing homes in the area, will feature high energy efficiency (EPC B or above) and renewable energy sources through heat pumps and solar panels. Harrogate Housing Association was established in 1968 in response to an appeal launched to mark the twentieth anniversary of the United Nations’ Universal Declaration of Human Rights, which addressed the need to provide good quality accommodation at affordable rents.

Another lender committed to lending to housing co-ops is Ecology Building Society. They can currently lend to co-housing groups through their Community and Business lending products.

It may also be worth trying local building societies.

Additional resources for co-housing and intentional communities

UK Co-housing Network has lots of information about intentional communities and co-housing which is more suited to those looking for a shared community but not necessarily a shared living space.

Diggers & Dreamers advertises spaces in existing housing co-ops or co-housing set ups. It also has adverts from those looking to set up such groups and properties for sale that might suit a community.

Credit union mortgages

Credit unions are co-operatives which provide accounts, loans, and a range of services to their members. Like building societies, they are mutuals owned and controlled by the members, not by external shareholders pushing for maximised profits. They are also not-for-profits so represent a good ethical option.

Some credit unions do also offer mortgages and they can sometimes beat the rates on the high street. However, this is mainly in Scotland, and credit unions often only offer their services to the local area. For example, to apply for a Glasgow Credit Union mortgage you must be a member and live or work within the Glasgow postcode area. As these products are not widely available to all UK consumers we have not included them in our guide, but it could be worth looking into whether there is a credit union in your area that offers mortgages. 

Additional research for this guide by Jane Turner.