Ripples from across the pond not affecting Ecology
Friday 14 September 2007
Ecology Building Society is in a strong position despite current financial climate
The recent events in the banking world - the collapse of the US sub-prime lending market and the crisis Northern Rock is experiencing - will no doubt cause concern to borrowers and savers alike. Despite these events Ecology Building Society remains in a healthy position with sufficient funds to support continued high lending levels.
Unfortunately, the problems in the US are having an effect in the UK, although not all financial institutions will be directly affected and building societies will fare better than some. As a building society, Ecology is not reliant on wholesale markets unlike banks such as Northern Rock, but obtains funding from more stable retail markets. Ecology like most building societies, keeps a percentage of its funds in investments that can be quickly turned in to cash i.e. liquid assets. This means the Society is not dependent on raising funds to support lending commitments. All of Ecology's mortgages are prime mortgages in the UK and the Society experiences minimal arrears and very few repossessions.
Ecology Chief Executive Paul Ellis comments; "For many years Ecology has obtained all the funds it needs for mortgage lending from members' savings, therefore we do not need to borrow money from banks. To maximise our commitment to mutuality, this is the way we prefer to operate and intend to continue operating."
Glossary
Sub-prime mortgages - loans to borrowers who are credit impaired i.e. have poor credit history and a record of repayment difficulties. These loans tend to be at higher interest rates and are considered a higher risk to lenders than prime mortgages. Sub-prime mortgages form a relatively small proportion of total building society lending. Ecology Building Society is not involved in any sub-prime lending.
Prime mortgages - loans to borrowers with a good credit history and which form all Ecology's lending.
