Credit unions looking at home loans

The organisation representing credit unions has confirmed it is considering making mortgage loans available to its members.

The move has been welcomed by Fianna Fáil which said it would provide much needed competition with the banks.

The Irish League of Credit Unions, which represents more than 500 credit unions, said it was examining the provision of home loans but that such a move was at least a year away.

The cash-rich league has more than €5bn available to lend. It has also confirmed it may allow parents to borrow money to put towards their child’s deposit for a house.

ILCU chief executive Ed Farrell said credit unions have been receiving requests from members for mortgages. With regard to credit unions potentially lending to parents for deposits, he said that if the figures made sense it could be done, but most loans were for much smaller sums.

The plan to compete with banks and building societies in the home-loan market will have to be approved by the Central Bank. Despite recent cuts, variable mortgage rates here remain among the highest in the eurozone.

Fianna Fáil spokesman on finance Michael McGrath welcomed the news, saying the credit union movement was well placed to provide mortgages to its members seeking to buy a home.

In doing so, credit unions would be providing badly needed competition for the banks, which are charging customers well above European norms for home loans.

“The lending restrictions imposed by the Central Bank have resulted in the credit union sector having a vast amount of cash which cannot be lent to members. The Central Bank needs to find ways of allowing the credit unions to put that money to work in the economy and the provision of mortgage finance is one such avenue that should be pursued. Last year, the Irish League of Credit Unions said its member credit unions had €5bn available to lend.

“Entry into the mortgage market would clearly present challenges for the credit union movement as the necessary expertise and proper risk assessment would need to be developed. I believe the Central Bank should engage positively with the credit union sector to explore what could be an exciting new chapter for the movement.”

Competition in the mortgage market could reduce the cost of home loans and, in turn, accelerate the cost of homes. New figures show the rise in the price of houses in Cork and Galway is outstripping that of Dublin.