New mortgage lending by credit unions jumped 51 per cent in the year to September, according to the Irish League of Credit Unions (ILCU), which represents 90 per cent of the total active credit unions in the Republic.
New home loans rose to €560 million for the period, with mortgages now making up 10 per cent of the total loan book of the sector, it said. The value of total new loans rose 7.2 per cent on the year to €2.78 billion, leaving credit unions with a total portfolio of €5.89 billion of loans.
“The credit union sector’s mortgage loan book has climbed to more than €700 million, almost doubling over two years, with clear momentum toward a €1 billion milestone over the next two years,” said David Malone, chief executive of the ILCU.
“We eagerly await the outcome of the Central Bank review of the credit union lending framework, and we would be hopeful of an easing of mortgage lending limits, further empowering credit unions to support homebuyers.”
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The Central Bank eased restrictions on longer-term lending at credit unions in 2020, resulting in some large credit unions issuing mortgages and business loans, in some cases, of up to 15 per cent of total assets. Still, for the majority of players in the sector, such long-term loans cannot exceed 7.5 per cent of total assets.
The regulator is planning to ease the rules further as part of a review that is set to conclude by early December.
[ Credit unions’ expansion in Irish mortgage market is a watershed momentOpens in new window ]
Central Bank deputy governor Sharon Donnery defended the staged approach to scaling back limits at an event last week, saying: “I am firmly of the view that these provided essential guardrails at the outset, given the need for credit unions to build the capacity and capabilities for this type of lending – a type of lending which needs different underwriting skills, not to mention more sophisticated asset and liability management.”
Meanwhile, ILCU members reported that customer savings increased by 2 per cent on the year to €15.3 billion.
Total loans across the sector equated to 32 per cent of assets, at €18.3 billion.
The ratio marks an improvement from levels of about 27 per cent that the Central Bank had reported for the entire sector four years ago. It had stood at 49 per cent in 2007. The optimal loan-to-assets ratio is widely viewed to be about 50 per cent.
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