Monday 26 June 2017

Credit Unions' €400m pot to push mortgage lending rules

Credit unions want a loosening of the rules that limit the amount of money they can lend for mortgages. Stock photo: Graham Moore
Credit unions want a loosening of the rules that limit the amount of money they can lend for mortgages. Stock photo: Graham Moore
Charlie Weston

Charlie Weston

Credit unions are gearing up to issue millions of euro worth of mortgages this year.

They expect to loan out €400m worth of home loans, mainly to people who want to switch their home loan to their member-owned lender.

The plans to expand mortgage lending come as credit union bodies continue to criticise strict rules that limit amounts that can be lent in mortgages.

Credit unions want a loosening of the rules that limit the amount of money they can lend for mortgages. They collectively have around €5bn to loan out, but each one is restricted on the amount of money it can lend for more than 10 years.

Despite the restrictions, a group of 32 credit unions is aiming to get the rules eased by showing they are capable of handling the complexities around homeloan lending.

Participating credit unions include Tullamore, Co Offaly, St Anthony's & Claddagh in Galway, St Canice's in Kilkenny, and Dundrum, Dublin.

Trader-uppers, first-time buyers and people buying an affordable home will be among the targets for the lending.

The initiative is being promoted by the Solutions Centre, a voluntary grouping of credit unions aimed at developing new financial products for consumers.

The Solutions Centre is providing underwriting advice, essentially assessing the member's suitability to borrow, and legal advice to credit unions that have signed up to it.

Kevin Johnson, of the Solution Centre, said there was huge member demand for mortgages.

Loaning out mortgages would boost dividends for member savers, he said.

"Given the demand, we have spent the last 10 months developing this mortgage framework, and see it as a significant framework for the credit union movement."

Mr Johnson, who is chief executive of credit union representative body CUDA, said the Solution Centre would give credit unions access to specialist mortgage and legal expertise.

He estimated that the State's 300 credit unions can loan out €400m of their collective €5bn in loans. Credit unions have already issued €105m in mortgages.

Read more: First-time buyers to drive market growth countrywide in 2017

Chief executive of the largest credit union, St Raphael's, Clair Byrne hit out at the mortgage lending restrictions.

The credit union, which has 34,000 members who are mainly gardaí, launched a mortgage product last March, but hit its lending limit in just 13 weeks.

"We have the capacity and the expertise to provide significantly more mortgages to members who can clearly afford to repay these loans, but the Central Bank regulations are preventing us from doing so," Ms Byrne said.

The Central Bank said it broadly welcomed the Solution Centre shared service initiative.

Irish Independent

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