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Rule changes set to allow credit unions to issue more mortgages


Ed Farrell: existing rules are restricting credit unions

Ed Farrell: existing rules are restricting credit unions

Ed Farrell: existing rules are restricting credit unions

Credit unions will be able to do more mortgage lending and issue more commercial loans under proposals from the regulator.

The changes will see the local lenders able to issue €1.3bn in home-loan and business borrowing.

It comes after the lenders have developed a new mortgage product with the aim of meeting regulatory requirements.

Most credit unions are currently restricted to lending no more than 10pc of their loan book over 10 years.

Some 15 larger credit unions have permission to issue 15pc of their gross loan book with 10-year terms.

But the sector's loan books have been shrinking for years.

Credit unions have complained that they are "severely restricted" by these Central Bank lending rules.

Irish League of Credit Unions chief executive Ed Farrell told the Oireachtas Finance Committee this week the sector has the capacity to offer mortgages, but the scale of its involvement in the market has been limited by the lending rules.

Now the Central Bank is proposing to scrap the existing 10pc limit on the number of loans that are issued with a 10-year term.

A tied system is proposed, which would see larger and more expert credit unions allowed to issue more longer-term loans, based on the level of their assets.

Credit unions have been struggling to grow their loan books, but they are asset rich.

The rule changes are expected to give credit unions more flexibility to issue big loans.

There would be a base lending limit of 7.5pc which would apply to smaller, less sophisticated credit unions. Up to 15pc of assets will be allowed to be issued in commercial and mortgage loans.

The sector has €17.2bn in assets, made up of loans, investments and fixed assets. Loans amount to €4.5bn.

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There are 264 credit unions, but many are small.

The changes will mainly affect the 53 credit unions with assets topping €100m and with the expertise to engage in long-term lending.

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