Offaly TD believes Credit Unions can offer much needed competition in mortgage market

Fianna Fáil TD for Offaly Barry Cowen has said that Credit Unions have the potential to offer badly needed competition in the mortgage market but that rules on lending restrictions will have to change to allow this to happen.

Deputy Cowen made the comments following news of an initiative from the Credit Union sector to assist member Credit Unions move into the mortgage market.

Deputy Cowen commented, “Credit Unions are operating in a difficult trading environment at the moment with a collapse in investment returns, onerous regulation and insufficient lending activity. A small number of Credit Unions are offering mortgages but they are severely constrained by the lending restrictions which allow a Credit Union to lend a maximum of 10% of its loan book over a period of greater than ten years.

“In reality, for an individual Credit Union, this restriction means that even lending a small number of mortgages will bring them up to their 10% restriction very quickly.  Given the investment that Credit Unions have to make to move properly into the space of mortgage lending, this lending restriction effectively stops them in their tracks. Engaging in longer term lending such as mortgages offers many advantages for Credit Unions including greater stability around their income levels.

Deputy Cowen stated that the Government needed to put in place a comprehensive plan to allow Credit Unions to effectively operate in the mortgage market. He noted that Ireland currently has some of the highest rates of variable mortgage interest rates in Europe adding that competition in the market is badly needed and Credit Unions hold the key to achieving this. 

“Fianna Fáil has been fighting the cause for Credit Unions for many years now," he continued. "We recognise the fact that Credit Unions are rooted in community and provide a local service to local people. In many towns and villages across Offaly, Credit Unions are the go to financial institution for savings and loans. Their community ethos and local knowledge adds to the trust in which they’re held and at a time when banks are increasing charges and reducing services, Credit Unions provide an important choice for consumers."

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