Updated: 19/12/17 : 06:43:04
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Credit Unions go head-to-head with banks on mortgages

Dozens of credit unions could be offering mortgages by the end of next year. A pilot project has been launched that will see a small number of the member-owned lenders offering home loans.

If this proves successful it is expected that up to 30 credit unions could be issuing mortgages by the end of next year, a move that would be a direct challenge to the banks.

Independent.ie reports that the home loans are set to be targeted at first-time buyers, movers and those who want to switch their mortgage from a bank to their credit union.

Loan rates are expected to be in line with the average offered by banks, but will not undercut them, a person familiar with the situation said.


The initiative is being spearheaded by the Irish League of Credit Unions, the largest representative body for the sector.

Global loan servicing firm Link ASI, which used to be called Capita, has been signed up by the league to provide administrative services for the loan offering.

Details of the mortgage move come as a new Central Bank report found that credit unions are struggling to grow their loan books despite improvements in their financial position.

Under the mortgage plan being hatched by the League of Credit Unions, a standardised mortgage product would be offered by each credit union that takes part in the initiative.

The offer will be restricted to residential mortgages. Only variable rates will be offered for now, with interest rates likely to be around 3.5pc, the average for the market.

The underwriting and assessing of the applications will be done by Link ASI, but the final decision on whether to grant the mortgage will be made by the individual credit union, and the funds will come off that credit union's balance sheet.

Current rules mean credit unions can only issue 10pc of their individual loan books in long-term lending, such as mortgages.

This is despite having some €6.4bn in total available to loan out.

However, the Central Bank is reviewing these rules, and a successful mortgage pilot project will be key to persuading regulators to relax the rules.

The league is seeking five credit unions to run the pilot project starting from February.

Meanwhile, the Central Bank said the total assets of the State's credit unions was now €16.8bn, up €3.1bn over the past five years.

Members' savings have increased by €2.3bn over the same time.

Regulators said loan levels, which had been falling, had now stabilised.

Credit unions have less than a third of their assets lent out, but regulators want to see them loan out around half of the value of their assets.

Loan arrears in the credit union sector continue to show a decreasing trend.

The Central Bank said a reduction in bad debt write-offs as well as loan provision write-backs had allowed credit unions to maintain surpluses.


Registrar of Credit Unions Patrick Casey, whose office is part of the Central Bank, said that while some modest improvements were noted, work remained to be done to ensure a sustainable credit union sector into the future.

He said credit unions needed to exploit their uniqueness, the cherished nature of their brand, their local advantages and their high personal interface with their members.