Credit Unions to be allowed triple mortgage lending
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Credit Unions will be allowed almost triple the lending they offer for mortgages and business loans following a review by the Central Bank.
Under new proposals, current limits on the sector will be significantly eased with the capacity for house and business lending rising from the current €2.9bn to €8.6bn.
Individual credit unions would be allowed to lend up to a maximum of 30% of their total assets for housing and up to 10% of their assets for business loans.
The sector has long campaigned for lending restriction to be eased. The total value of the credit union sector mortgage loan book has increased to more than €700m and mortgages now make up more than 10% of the total credit union loan book.
Despite the dominance of the main pillar banks when it comes to home loans, the continued expansion of the credit union sector and the planned entry by new financial institutions is expected to bring further competition to the market following the exit of Ulster Bank and KBC.
The Central Bank will now commence a public consultation period on the changes.
Central Bank deputy governor Sharon Donnery said the lending framework for credit unions will continue to provide important guardrails for the sector and for the protection of members’ funds.
"However, we are committed to ensuring the regulatory framework is responsive and appropriate in a financial system that is changing at pace," she said.
"Today’s publications are an important milestone for credit unions and their members and provide further opportunity for the sector to develop and collaborate in a meaningful and sustainable manner. Our expectation is that the proposed changes to the lending framework if implemented, would enable those credit unions that wish to undertake increased house and business lending activity in order to diversify loan books, improve loan-to-asset ratios and better deliver for their members," she said.
Credit Union Development Association CEO Kevin Johnson said credit unions have already begun to account for a growing share of mortgage switches.
"With these enhanced lending limits, more credit unions will be attracted to helping members finance their home purchase.
"The enhancing lending limits also mean that collectively the credit union sector is poised to more than triple its current mortgage loan books to over €2bn in the coming years, further establishing themselves as strong contenders in the Irish mortgage market."
David Malone, CEO of the Irish League Credit Unions which represents 90% of the sector welcomed the changes which they championed over the last 18 months.
"These proposals represent a vital step forward, further empowering credit unions to support homebuyers and businesses. It is imperative that these necessary changes are implemented at the earliest opportunity," he said.