Poll: Should mortgage lending rules for credit unions be relaxed?

It has been suggested that they could increase competition for the dominant banks.

By Conor McMahon Deputy editor, Fora

CREDIT UNIONS HAVE moved a step closer to becoming more meaningful players in the mortgage-lending market.

Over the weekend, the Irish League of Credit Unions (ILCU) voted in favour of a motion to make funding available for a centralised support system to help manage mortgage applications.

It is hoped this system will make it easier to manage the admin side of the mortgage lending process. Individual credit unions will ultimately be responsible for the lending decision.

The proposal would allow credit unions to collectively lend up to €550 million, the maximum amount permitted under existing Central Bank-imposed limits.

Right now, credit unions are only allowed to loan out 10% of their total loan book on terms that are 10 years or greater. This has the effect of significantly restricting mortgage offerings in a market dominated by the pillar banks.

The ILCU said it will continue to campaign for an extension of this cap. However, a Central Bank director has suggested that it’s unlikely lending restrictions will change any time soon.

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Ed Sibley – direction of credit institutions supervision at the financial regulator – said in an address to the ILCU AGM that the Central Bank has for months spoken to credit unions on the issue, but it has not yet received credible proposal from the sector.

He said that while some credit unions already provide mortgages, doing so on a larger scale would be more challenging because a raft of additional domestic and European legislation would have to be taken into consideration.

With that in mind, we’re asking Fora readers this week: Should mortgage lending rules for credit unions be relaxed?