Credit unions could become the social financial enterprises of the Irish mortgage market, which would be a huge benefit for consumers. Photograph: iStockmarket. From this autumn, every credit union in the country will be able to offer mortgages, as credit unions will be able to refer mortgage applications to other credit unions should they not be in a position to provide the loan themselves.
The legislative changes signed in earlier this year could see credit unions become the social financial enterprises of the Irish mortgage market. Following the demise of building societies in the Republic, such a development would be a huge benefit for consumers.Building societies first cropped up in Ireland in the late 19th century, with the pioneers pooling their financial resources to buy houses.
The Government is standing full square behind the credit unions becoming a bigger player in the mortgage market. Following a series of meetings with mortgage lenders this summer, Taoiseach Simon Harris said he was “happy to hear” about the ambitious expansion plans of credit unions, including in the area of mortgages. Mr Harris has committed to following up on several matters raised by credit unions, and credit unions are hopeful that this will allow them to lend and do more.
One of the biggest advantages of being a member of a credit union is the price stability of its products and services. As credit unions lend from their pool of savers’ money, their loan rates are not directly affected by movements in ECB interest rates or changes on international money markets. So, while many of those with bank mortgages saw their monthly mortgage bills soar when ECB rates started to rise in July 2022, this was not the case for credit union mortgage borrowers.
Added to that, there are unique benefits offered by credit unions that aren’t available at the banks. For example, many credit unions provide a free benefit, known as loan protection insurance, whereby the balance of a personal unsecured loan is repaid in the event of a member’s death. There shouldn’t be a one-size-fits-all approach to credit unions. Instead, the Central Bank needs to consider a tiered approach to these limits so that those credit unions with proven governance and high levels of professionalism in managing their existing liquidity and loan books can lend more.