Credit Union Sector Has 'Huge Potential' To Assist In Mortgage Lendings

The Credit Union sector has "huge potential" to issue home loans and assist in meeting a major social need, according to Fianna Fáil finance spokesperson, Michael McGrath.

Deputy McGrath said that new information provided by the Finance Minister, Michael Noonan, revealed that the total amount of outstanding credit union home loans at the end of March was around 5,000 mortgages worth a combined €106.5 million.

This is said to represent approximately 2.6% of the total loan book of the credit union sector and less than 1% of their deposit base. The total residential mortgage market in Ireland is €100 billion with a further €26bn in buy-to-let loans outstanding.

"Credit Union mortgage lending is currently a drop in the ocean in terms of the overall mortgage market. It is clear that there is massive scope for increased long term mortgage lending within the sector," Deputy McGrath said.

"There are a number of ways in which this can be done. Some larger credit unions are already directly writing home loans. Where the expertise exists for the associated underwriting, credit unions should be facilitated in this regard. It may be necessary to review the current 10% limit on long term lending to allow this to develop further.

"In other cases it may be more advantageous for credit unions to work together to undertake mortgage lending so that the cost of administration can be shared. They could also become involved with Approved Housing Associations by providing funding to support the very valuable work that they undertake. However, this will require legislative and regulatory amendments to be put in place.

"There is now a widespread acceptance that there needs to be more creative solutions adopted to deal with the current housing crisis. I believe credit unions can play a major part in this – they can be of major assistance in both the private and social housing sectors.

Deputy McGrath said that the Department of Finance and the Regulator should take a "proactive approach" in exploring the potential of the credit union sector.

"In other countries credit unions and similar community based banks already play a positive role in house lending. There is significant untapped potential which can be availed of and it is important that it be done as a matter of priority," concluded Deputy McGrath.


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