Credit unions are pushing for a greater stake in a new shake-up of the mortgage market, in a move that could offer a much-needed reprieve to first-time buyers struggling to get a home.
The sector wants to fill the gap left in the mortgage market by the exit of Ulster Bank and KBC, the Irish League of Credit Unions said yesterday.
Their appeal to the Central Bank comes as house prices soared by another 14% on average nationally in the last 12 months and as the European Central Bank looks poised to increase mortgage interest rates for the first time in 11 years as inflation soars across Europe.
Seán Fleming, Minister of State at the Department of Finance with responsibility for Financial Services, Credit Unions and Insurance, said last night that he expects to get Government approval to draft new legislation to help credit unions lend more in the mortgage market in six weeks. He expects this legislation to be before the Oireachtas in the "first half of this year".
As the housing crisis deepens, credit unions want now to become a nationwide "community bank" offering more home loans.
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Almost 43,500 mortgages were drawn down last year, worth €10.5billion, the highest value since 2008 at the height of the boom.
Even in December, normally a quiet month for the property market, there 3,856 mortgages approved - some 2,096 were for first-time buyers (54.4%) of total volume) while mover purchasers accounted for 891 (23.1%).
As Ireland has the highest new mortgage rates in the Eurozone, at 2.69%, any extra competition in the mortgage loan market is welcome, said Dr Lorcan Sirr, lecturer in housing at Dublin Institute of Technology.
"Generally, more competition would be a good thing and I like the fact that their motives are slightly more for the people than for the shareholders, which is a good thing," he said.
Credit unions say they are 'currently handcuffed by the restrictive lending limits for mortgages prescribed by the Central Bank of Ireland'.
Currently, a credit union with assets of €70million can offer fewer than 40 mortgages under the current limits, taking an average home price of €300,000. With other lending commitments, this is often reduced further.
Irish League of Credit Unions (ILCU) deputy chief executive David Malone said: "Credit Unions have lending experience, they always put the borrowers first, great local knowledge, lots of funds to lend and a great reputation, so we think they're a great fit for mortgages."
While ultimately, the Central Bank needs to change the regulations, Mr Fleming said that among the proposals being prepared are to allow two smaller credit unions to come together to provide a loan. At the moment they can't do this.
Dr Sirr said: "We have a very competitive lending market and a lack of competition in the whole housing sector was identified by the EU as one of the problems we have with high house prices.
"Credit Unions are for and about the people as opposed to shareholders, which is generally a good thing. The Credit Unions limited the amount of money people could put on deposit because they had too much money and low interest rates were costing them money."
There are now fewer than 250 credit unions in Ireland, down from 428 in 2006, as many merged after the financial crash.
Housing campaigner David Hall, of the Irish Mortgage Holders' Organisation, said of the bid by the credit unions: "There are unrealistic caps restricting them. Ultimately, those caps, those restrictions, only damage the consumer.
"We've lost two banks in the market, two big lenders, KBC and Ulster, they weren't small, proper banks doing proper volumes.
"This will fill some part of the gap but it needs the regulatory changes to be made, and quickly."
Mr Malone said the ILCU was asking Mr Fleming to "address the imbalance caused by the restrictive regulatory lending regime in his soon to be published review of the policy framework within which Credit Unions operate.
"The publication of this policy framework review presents a once-in-a-decade opportunity for the minister to empower credit unions to realise their full potential in filling the gap left by Ulster Bank and KBC and in doing so, offering a community-based alternative to the remaining banks to the Irish public."
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