Young, gifted and green: meet the society that recycles your savings

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The Independent Online
Building societies may seem like an endangered species but the Ecology seems less likely than most to fall prey to the windfall hunters.

Indeed, when the subject of demutualisation was discussed at the annual meeting in April, all the members present said they wanted its mutual status retained, says director Paul Ellis.

True to its name, the Ecology sets out not simply to lend but to "recycle money". It uses investors' deposits to lend only to projects likely to save non-renewable resources, promote individual self-sufficiency, regenerate communities or lead to the most ecologically efficient use of the land.

This has also meant lending on properties that other organisations have refused to touch.

Elaine Owen began saving with the Ecology in 1992 because "the ethical principles fit with my world view and I didn't want to be just another statistic in some huge institution".

In 1994 she and her husband decided to buy a remote and dilapidated 18th century farmhouse in North Yorkshire. "When last used the house was a handloom weavers' workshop and a cowbyre, so no other lender looked on us as even vaguely sensible," says Ms Owen. But with an Ecology mortgage and plenty of recycled timber and stone, the Owens have now restored the house, rebuilt the roof exactly as it would have been and set up an organic small holding.

Another example is provided by Wilf Burton who set out in 1994 to build a house in Somerset using passive solar design - a use of materials that enhances insulation - and "green oak" principles - a type of construction which uses no nails.

After buying two building plots with the support of his local Lloyds Bank manager, Mr Burton was refused a mortgage when a "routine" bank evaluation report sharply downgraded the project. "The Birmingham & Midshires also turned us down, despite my credentials as an architect," says Mr Burton.

After three or four staged payments and for a total cost of around pounds 90,000, the Burtons have completed a house that is now valued at about pounds 140,000.

The Ecology is one of Britain's smallest building societies, with 4,500 savers, fewer than 500 borrowers and only one branch - in Keighley, West Yorkshire. But its business is also the fastest growing of any society.

When it was established in 1981, making it the most recently formed society, the Ecology offered products with uncompetitive rates. Now the position is more mixed, underlining that worthy principles do not have to preclude savers and borrowers from getting a reasonable deal.

Borrowers, it is true, do not benefit from the big discounts available elsewhere; instead they are offered a "no gimmicks" mortgage at a standard variable rate of 7.15 per cent over 25 years. The society also demands a 20 per cent deposit "to encourage prudence and protect our members". However, this mortgage rate compares well with most other lenders' standard rates (typically 7.24 per cent) and will be available on some properties that rivals won't touch. In addition, after three years living in a property, borrowers can qualify for a 0.25 per cent discount over the remaining life of the loan.

The society's first-generation Ecology Green Tax-Exempt Special Savings Account proved one of the best-performing from any society or bank. Its current Tessa, however, offers a less alluring 5.85 per cent.

The Ecology's standard savings account, ECO Instant, currently pays 4.0 per cent gross on deposits over pounds 10,000, dropping to 3.75 per cent at pounds 5,000, 3.5 per cent at pounds 500 and 1.0 per cent thereafter. While these rates may not sound particularly attractive, 3.5 per cent on a few thousand pounds is not uncompetitive. There are no chequebooks, but deposits can be made free of charge through Yorkshire Bank or Royal Bank of Scotland.

As a matter of principle, the Ecology claims it will not look to widen its profit margins by reducing its savings rates before its borrowing rates - a criticism that is levelled at many societies.

The Ecology has not been immune from bonus-hunters, however. "We've seen a strong inflow of funds in recent weeks," says Mr Ellis, "but speculators are easily identified because they send pounds 100 to us when joining only requires pounds 10. We don't expect to hang on to them long because we are too young to have a capital base capable of generating huge windfalls." But even as it gets older and richer, the suspicion is that it will not sell out.

New House Hall is a grade 2* listed Elizabethan manor house in a poorly regarded part of Huddersfield "red lined" as a bad risk by major lenders. It is one of only a few thousand UK buildings with grade 2* status.

Darrolyn and Christoph Von Mickwitz (above) had been tenants for 21 years until 1994 when they bought the freehold from the local council, after it became clear they would have to buy if they wanted to preserve the house.

"We wanted to see one of the few historic buildings in the area renovated, but the only grants available were for owner occupiers," says Darrolyn.

"Eventually, the council asked a fair price and offered to guarantee a mortgage so we could exercise our right to buy at the 50 per cent discount. Despite this, and even though we wanted to borrow less than 80 per cent of the property's value, getting a mortgage proved virtually impossible."

Eventually, in search of insurance for high-risk properties, Darrolyn went to the Ecology building society.

"I mentioned the trouble we were having getting a mortgage and within a couple of hours the Ecology had rung back to tell us it could give us what we needed." Photograph: GUZELIAN