Thursday 18 July 2019

Huge rise in credit unions entering mortgage market

More than 110 unions now provide home loans, with debit cards the next step, writes Louise McBride

In late March 2016, only around 40 credit unions offered a mortgage. This has since soared to more than 110.(stock photo)
In late March 2016, only around 40 credit unions offered a mortgage. This has since soared to more than 110.(stock photo)
Louise McBride

Louise McBride

The amount of credit unions offering mortgages has almost tripled over the past three years - and with more set to roll out home loans over the next year, an increasing number of people will have the option of getting a credit union deal.

In late March 2016, only around 40 credit unions offered a mortgage. This has since soared to more than 110.

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"We expect more credit unions who have not to date offered mortgages to do so over the next 12 to 18 months," said a spokeswoman for the credit union lobby group, the Irish League of Credit Unions. "A change in Central Bank guidelines for long-term lending [by credit unions] would be a catalyst for this."

These Central Bank rules - which typically only allow a credit union to lend up to 10pc of its loan book over a period of more than 10 years - are currently being reviewed.

In 2016, credit unions explored how they could enter the mortgage market in a more meaningful way, and they have made strides into that market since.

The value of mortgages lent out by credit unions in late September 2018 stood at €171m - 50pc higher than the previous year, according to the latest figures from the Central Bank. Some large credit unions now offer mortgages of as much as €300,000, and others offer more. St Raphael's Garda Credit Union - which is one of the largest credit unions in the country - offers mortgages of up to €300,000, though a spokesman said it would "consider higher amounts on an exceptional basis if necessary".

Credit union mortgages, however, can work out more expensive than those from banks.

Meanwhile, around 34 credit unions - including Cara Credit Union in Kerry - are set to launch a current account and debit card this autumn.

"We are working with 34 credit unions under Payac [a credit union-owned company] to deliver a fully fledged current account this autumn, complete with a debit card and overdraft facility," said Suzanne Ennis, business development manager with Cara Credit Union.

Payac is a company set up by credit unions to provide current accounts, debit cards and other services to credit union members.

The upcoming rollout of current accounts by credit unions could mark another turning point for the sector, as it should for the first time allow them to fully compete with banks for day-to-day banking services.

Separately, last Thursday, 16 of Ireland's largest credit unions embarked on a €10m joint venture - known as Metamo - with the Irish financial services group Fexco.

The aim of the joint venture is to support credit union viability and sustainability by providing customers with modern financial products.

The 16 credit unions involved represent more than 480,000 members from across the country.

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