Credit unions take on banks with some of the lowest mortgage rates in the Irish market

The member-owned lending institutions are ramping up their mortgage lending in a bid to broaden their offering, prompting hopes they could challenge the dominance of the banks. Loan rates as low as 2.95pc are now available from some credit unions, which is far below than anything from the three mainstream banks or the non-bank lenders.

A major analysis of mortgage offerings by the sector carried out by the Irish Independent shows almost half of the State’s 205 active credit unions are now offering mortgages, to both first-time buyers and to switchers.

The analysis found that mortgage lending by the sector is growing rapidly, up some 27pc last year, with spare lending capacity of another €2bn.

Although they have only a small presence in the mortgage market so far, experts said credit unions could be on the cusp of taking on the main banks when it came to lending for home purchases and switching.

The three main banks control 90pc of the mortgage market.

A number of credit unions have both variable and fixed rates of around 3pc, with a larger number offering rates of 4pc. This contrasts with two of the non-bank lenders, ICS Mortgages and Finance Ireland, which have variable rates of over 6pc.

Meanwhile, credit unions rates are not affected by movements in European Central Bank (ECB) interest rates.

Credit union mortgages are funded by savings of its members and each credit union sets its own rates to give it a reasonable return, rather than to generate a profit.

Some of the mortgage rates being offered by credit unions are the lowest in the market.

St Canice’s Credit Union, serving Kilkenny and parts of Carlow and Laois, has a three-year fixed rate of 3.15pc.

Cork’s Youghal Credit Union has a variable rate of 2.9pc.

Member First in Dublin has a five-year fixed rate of 3.2pc.

St Raphael’s Garda Credit Union has a variable rate of 2.95pc. It said it had no plans to increase the rate.

Education Credit Union, which is for those in secondary-school sector and their families, has a variable rate of 2.75pc, the lowest of any mortgage lender in the market.

St Jarlath’s Credit Union in Galway offers a variable of 3.99pc.

The sector has around €2bn in spare lending capacity, according to David Malone, chief executive of the Irish League of Credit Unions.

He said: “We are aiming to have a national footprint in mortgages. And credit unions are offering mortgages at competitive rates.”

When shown the range of mortgage rates charged by credit unions, broker Martina Hennessy, of Doddl.ie, said: “These particular rates are competitive rates relative to the market.”

Kevin Johnson, who is head of the Credit Union Development Association (CUDA), another representative body for the sector, said the number of people switching their mortgages to credit unions had grown massively since the start of the year.

“If you’re paying a high rate of interest on your mortgage, or you are about to get a mortgage to buy your home, you should consider contacting your credit union to see what’s on offer,” he said.

Mortgage broker Michael Dowling, who is also chair of Malahide Credit Union, said smaller credit unions such as his did not offer mortgages because it did not have the capacity to lend for a mortgage.

But the Credit Union (Amendment) Bill 2022, which is going through the Oireachtas, would allow credit unions to refer members to other credit unions if they did not offer products such as mortgages, he said.

Anyone getting a mortgage from a credit union is subject to the same loan-to-income and loan-to-value Central Bank lending restrictions as they are applied to the banks.

People can apply to the credit union only if they live in the area it operates in, or work in a job where there is a credit union for the staff.

And experts pointed out that each credit union sets its own mortgage rates.

There are no figures for the mortgage market share of credit unions.

But the Central Bank said in March they had the potential to increase mortgage and business lending to €2.1bn if all credit unions with total assets greater than €100m applied to it to be allowed to maximise their long-term lending.