Raising credit union lending limits would offer “immediate and tangible benefit” to homebuyers, given the evidence of strong and growing demand for the sector’s mortgage products, the Irish League of Credit Unions (ILCU) has said.
The body, which represents more than 90 per cent of the Republic’s total active credit unions, published new data on Tuesday, indicating a 10 per cent jump in its members’ mortgage lending in the three months to the end of June from the previous quarter to €518 million. Mortgages also now represent 10 per cent of the sector’s total loan book, the ILCU said.
Overall, there were 110,000 new loans issued in the quarter, up 21 per cent on the previous quarter, representing total annual loan growth of 12.8 per cent. The total ILCU-affiliated loan book stood at €5.74 billion at the of June, the highest level in more than 15 years.
At the same time, the volume of loans in arrears across the body’s membership was 2.54 per cent, a record low, according to the report.
ILCU-affiliated credit unions had total assets of €18.3 billion with savings jumping to €15.3 billion.
Against this backdrop, the Central Bank will later this year publish a report on a review of its lending framework that credit unions are hopeful will recommend raising the lending limits at a time when competition in the Republic’s lending market remains challenged following the departures of Ulster Bank and KBC Bank in recent years.
In place since 2019, the rules limit mortgage and small business lending to 7.5 per cent of the credit unions’ total assets or 15 per cent for larger credit unions that present a business case to the Central Bank and receive its permission.
[ Credit union regulators should allow ‘prudent’ lending increase - reviewOpens in new window ]
The limits, which do not apply to banks, were introduced in the wake of the financial crisis but the sector has long argued they are not fit for purpose. A review of the Republic’s credit union sector undertaken last year by international credit union regulators from the UK, the United States and South Africa said the Central Bank should engage with credit unions on plans they develop stemming from legislation enacted last year to boost the movement.
David Malone, chief executive of the ILCU, said the latest lending figures, which show the sector’s total mortgage loan book has grown to €600 million, show the movement is “providing much-needed competition and customer choice in the hyper-concentrated mortgage market”.
He said: “Given the clear demand for mortgages and credit union services overall, changing the lending limits will offer an immediate and tangible benefit to aspiring homeowners across Ireland. As such, it is our understanding that the Central Bank of Ireland will issue a report on the review of the lending framework by the end of the year, which we very much welcome.”
Meanwhile, ILCU-affiliated credit unions continued to ramp up digitalisation over the quarter. Digital transaction volumes have increased by 30 per cent over the past 12 months and 400 per cent over five years, the body said, to a total value of €2.3 billion.
Credit unions are “digital when you want it but also here in person when you need it”, Mr Malone said. “This holistic approach is what sets us apart from other financial institutions and drives our evolution.”
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