‘Pent-up demand’ for credit union mortgages
Dublin City University credit union researcher Ciarán Mac an Bhaird’s Towards 2030 — Lending Opportunities for Credit Unions report says there are “considerable benefits” for consumers if credit unions enter the mortgage market.
His study findings claim that the current “highly concentrated” mortgage lending market has the potential for a higher interest rate being charged to consumers, and that current regulations should be eased to enable credit unions to participate in mortgage lending in a meaningful way.
A spokesman for the Irish League of Credit Unions (ILCU) said the report vindicated its members who want to enter the mortgage market.
“The ILCU supports amending the current lending limits imposed on the credit union sector to enable credit unions to become significant players in the mortgage market,” said the spokesman. “Credit unions affiliated to the ILCU have significant financial capacity, and there is significant, pent-up demand amongst credit union members for this service.”
Dr Mac an Bhaird said the participation of credit unions in mortgage lending was important from a market diversification and financial deepening perspective.
“The mortgage lending market in Ireland has become concentrated in a very small number of lenders, leading to lack of choice and competition for consumers,” he said. “Credit unions can enhance financial resilience and macro-stability, and bring a competitive discipline to the mortgage lending market. Evidence from other countries indicates that regulatory reform is the catalyst for credit unions becoming a significant participant in mortgage lending.”
Dr Mac an Bhaird will present the report’s findings to the ILCU’s two-day AGM in Dublin this weekend.
ILCU president Brian McCrory will tell the AGM in his address: “Today we stand ready to be a vehicle for lending for social housing, for lending to SME’s and for mortgages. Communities across our island need us.”
Another industry body, the Credit Union Development Association (CUDA), said it was entering the mortgage market in January with €400m in funds.
The Solution Centre in Dublin, run by CUDA, said it will provide help for the biggest credit unions in the country, representing 1m customers.
Credit unions face restrictions on the amount they can lend out in mortgages. Under the 2016 regulations introduced by the Central Bank, credit unions are allowed to lend up to 30% of their loan book over five years and up to 10% of their loan book over 10 years, subject to a maximum maturity of 25 years.
Des Carville, head of shareholding and financial advisory division at the Department of Finance, told the Oireachtas Finance Committee last month that an “implementation group” had been formed to oversee the findings of last year’s Commission on Credit Unions Report.
Mr Carville said: “There is a persuasive argument that the lending limits constrain upfront investment and this will form part of the implementation group discussions.”
