Ecology warns over state of housing market

Paul Ellis, chief executive of the mutual, also said net lending will continue to rise, after hitting the £10m figure for the first time last year, as savers continue the flight to safety in the aftermath of the financial crisis.

Ecology, which is based in Silsden in West Yorkshire, specialises in mortgage lending for green projects and ethical savings accounts, made pre-tax profits of £445,000 in 2010, down slightly on £464,000 the previous year.

Its overall growth in assets slowed in response to the continuing record low in interest rates.

Ecology, which marks its 30th anniversary this year, was the last building society to be set up in Britain and is one of the smallest in the country.

Yesterday Mr Ellis said lending would continue to rise but warned that the slump in the housing market would not be quickly reversed.

He told the Yorkshire Post he expected a period of “relatively low house prices and low transaction levels” in 2011 as economic prospects remain uncertain.

“I don’t expect us to forge ahead with growth in the economy. Avoiding a double dip would be an achievement but whether that happens remains to be seen.

“There are factors out there over which we have little control, like interest rate rises (and) things like the Japan earthquake.”

Mr Ellis said Ecology’s net lending would rise again this year but consumers had shown a “slight nervousness” about the level of interest rates. The Bank of England’s base rate remains at 0.5 per cent.

Ecology said its provisions for bad debt had increased to £407,000, from £118,000.

Overall asset growth slowed to 1.8 per cent, compared to 9.1 per cent the previous year.

“We took the view that we needed to keep liquidity at lower levels due to its cost to the society when interest rates are so low,” Mr Ellis said.

“However, towards the end of the year, strong lending figures enabled us to successfully reintroduce our Eco60 notice account and a new issue of our popular one year Earthsaver Bond. Once again, the society did not incur any losses in our lending or treasury operations.”

The mutual lends for projects ranging from renovating run-down properties or eco-friendly new builds to organic smallholdings, straw bale constructions and housing co-operatives and associations.

It said its results, published during Climate Week, were a “stark contrast” to the furore over the green festival, which has been boycotted by more than 20 green groups after it agreed a sponsorship deal with Royal Bank of Scotland.

The taxpayer-backed lender has been criticised over its financing of the coal industry.

Malcolm Lynch, the new chairman of Ecology, said its prospects for the year ahead are “very strong” but called for lenders to act sustainably.

“We need an alternative banking sector that also needs to grow if we are to maximise the potential of this movement.

“We need deposit-taking and lending organisations that practice sustainable financial models with sufficient capital to underpin their activities. That is not to imply a risk-free banking system, but does mean that risks are entertained within positive social and environmental parameters and not led by blind profit maximisation and growth.”

Mr Ellis, speaking in the run-up to today’s Budget, also said he had been disappointed so far by the gap between the coalition Government’s “rhetoric” on green jobs and the support it had provided.

“It is very disappointing that support for feed-in-tariffs could be cut and the level of support for the Green Investment Bank has been slowed somewhat.”

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