Senator calls for credit unions to enter mortgage market

With the exit of Ulster Bank and KBC, Senator Victor Boyhan suggests credit unions could fill that gap — but strict lending limits would greatly limit their ability to offer home loads

Taking an average mortgage of €350,000, a credit union with assets of €70m could only offer 15 mortgages, exclusive of loans to SMEs. File Picture: Unsplash

Senator Victor Boyhan called for an increased role of Credit Unions in Ireland’s mortgage market.

Mr Boyhan believes credit unions have the funding in place to be able to go into competition with banks and offer customers mortgages.

“Irish credit unions are in a position to offer an increased contribution in the mortgage area,” said Mr Boyhan during a Seanad Committee meeting. 

Mr Boyhan also suggested that credit unions could be used to fill the gap caused by KBC and Ulster Bank exiting the Irish banking market and become “key providers in community banking.” 

The Government already has commitments to access the role of credit unions in Ireland as part of its Programme for Government.

In reply, the minister with responsibility for credit unions, Sean Fleming, said there are commitments to review the policy framework in which credit unions operate. He stated that his priority is to see credit unions increase their lending “as that’s how they become sustainable going into the future.” 

However, credit unions must comply with restrictive lending limits for mortgages imposed by the Central Bank. Mortgage and SME lending is limited to a combined maximum of 7.5% of total assets for most credit unions.

This means that a credit union with assets of €70m and taking an average mortgage of €350,000 can only offer 15 mortgages under these restrictions, exclusive of any SME lending, according to the Irish League of Credit Unions.