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Apr 02 2024

Credit Union Report Strong Mortgage Performance as borrowers seek out better deals

By News

CUDA supported credit unions on track to provide €150m of new mortgage offers this year – the credit union sector will exceed €250m

  • Average mortgage amount is €185,400
  • Average interest rate is 3.72%
  • Credit union mortgage lending should reach €1bn per annum by 2027

Credit unions on CUDA’s Mortgage Support Platform, SAM which the majority of mortgage approvals in the credit union sector, are on track to provide €150m or more of mortgage offers this financial year with the – a remarkable 18-fold increase in mortgage activity in just six years.

Total mortgage lending on the platform – a framework which allows credit unions to offer residential mortgages – already exceeded €70m in the first half of the current financial year for credit unions which commenced on the 1st Oct and will easily exceed €150m for the full year. This is up from €8.1m in 2018. An incredibly strong performance according to the platform’s half yearly results[1], which have just been published.

Other highlights of the results show that:

  • The average mortgage amount has almost doubled since 2018, increasing from €108,835 in 2018 to €185,474 in 2023 on an average property value of €341,700
  • The average mortgage term has increased from 18 years in 2018 to 23 years in 2023
  • Average interest rate is 3.72%

35% of borrowers are individuals with the remaining 65% couples

The SAM mortgage platform is a wholly credit union owned service which supports credit unions in achieving significant levels of mortgage lending. Currently, more than 25 credit unions are now providing mortgages through the platform and this is constantly growing.

Commenting on the new figures, Kevin Johnson, CEO of CUDA said:

“The phenomenal growth in lending is driven by an increased appetite for credit union mortgages as well as the increased ability of credit unions to provide mortgages. The demand from Members is clear, they want an alternative to the banks and Credit Unions are stepping up. For several years now Regulators have encouraged credit unions to grow their lending and it is testament to the dedication of credit unions to upskill and bring much needed competition to the market. As the figures show they are doing this in a prudent manner and growth in loans is reflective of their growth in capability.  Legislators have also encouraged credit unions to increase their lending and arising from the  legislative changes signed last February, in the last quarter of this year credit unions will be permitted to offer a service or product such as a home loan to a member of another credit union – under a formal arrangement with that other credit union. This effectively means that every credit union in the Country will be able to offer mortgages.

Experienced credit unions in this space are evolving from niche players to full participants in the mortgage market.  Today’s figures are indicative of the evolving confidence and risk appetite of credit unions as they gain more experience in providing mortgages.

The numbers reflect this very fluid and developing market for Credit Unions. The last financial year was the first full year in which SAM credit unions have offered fixed rate mortgages, and they have quickly taken root representing almost one quarter of total mortgage lending on the platform. And though green mortgages accounted for 6.5pc of total mortgage offers, this product is only emerging and currently only available from three credit unions on the platform, for those credit unions green mortgages account for 35% of their total mortgage lending”.

CUDA contend that as a result of the new legislative changes, we believe that total new credit union mortgage lending could reach €1bn per annum by 2027 which could put credit unions in the top five mortgage lenders.

Mr. Johnson concluded,

“There is already strong demand for credit union mortgages. With the support of CUDA’s Mortgage Platform, with more supports coming available in the near future and indeed even with every credit union in the country effectively being able to offer mortgages, we hope this will encourage the Central Bank of Ireland to extend the boundaries and facilitate credit unions provide even more home loans. Credit unions are trusted by consumers – in 2023, they topped the table for the best customer experience (the CX Customer Experience report) in Ireland for nine years running. Furthermore, credit union lending rates are particularly competitive as they are not impacted by elevated ECB rates. While the banks hold the lion’s share of mortgage lending in Ireland, with total mortgage lending for the banking sector reaching almost €11.4bn in 2022, credit unions have become and will continue to be a strong contender in the Irish mortgage market and are on track to win more of this mortgage pie from the banks in the coming years.”

ENDS

 

Notes to editor

SAM

SAM (System for Application Management) is a best practice framework for credit unions to offer consumer mortgages. As a wholly credit union owned service, the purpose of SAM remains to support credit unions in achieving significant levels of mortgage lending, delivered at a price point that will not erode their financial performance on a low margin product line.

SAM provides credit unions with optimised processes from application to assessment, documentation and a workflow management system that ensures a consistent approach and compliance with ESIS, MARP and other requirements.

SAM includes training and service support, access to CUDA’s legal and compliance services, and the option for external file assessment by an industry expert at discount rates.

Excellent member experience is ensured via streamlined processes, competitive rates and the personal approach which has made credit unions the most trusted brand in Ireland for many years running.

SAM was originally launched in 2017 and was upgraded in 2021. For more details, visit www.solutioncentre.ie.

[1] For the months Oct 1, 2023 to March 31, 2024

Nov 30 2022

Credit Union Development Association (CUDA) delighted to see publication of the Credit Union (Amendment) Bill 2022

By News

Over many years credit unions have operated within outdated legislation – legislation not fit for purpose in a modern era. For some time now, CUDA has called on the Government to introduce enhancements to the existing credit union legislation to ensure credit unions can reach their potential on behalf of their members.

Today, the Government has published a new Credit Union (Amendment) Bill. On behalf of its members and the credit union sector at large, CUDA welcomes this development. According to Kevin Johnson, CEO CUDA, “this unique opportunity will enable credit unions to offer and deliver more benefits through enhanced products and services to existing and future credit union members”.

Credit Union legislation was last overhauled 10 years ago by the Credit Union and Co-operation with Overseas Regulators Act 2012.

The published amendments will allow greater collaboration and choice when developing credit products and offerings to consumers such as sharing large community project loans amongst a number of credit union participants (“loan sharing” or “loan participation”), and the ability to offer a full range of services to consumers, irrespective of the fact that a credit union may not have that product themselves e.g. mortgages, by introducing the member to a colleague credit union that does offer the product or service (“loan introduction”).  These are standard practices amongst credit unions in other jurisdictions such as Canada.

CUDA particularly welcomes the changes that recognise the great work of volunteer directors, who provide a professional service pro bono. The changes will allow them to focus more on the overarching governance and strategic direction and policy making of the credit union, while allowing a credit union assign new roles, focusing on implementation and operations, to its professional management team.

There is no doubting the trust members place in their credit union. The relationship is unique. CUDA is pleased that the legislative changes will allow credit unions continue their special relationship with members and the community through environmentally friendly methods – including the introduction of digital enhancements to their existing services and facilitating additional loans to the community. However, CUDA is quick to note that credit unions are very aware of the importance of face-to-face interactions with their members. Something that is greatly diminishing in other areas of the banking.

CUDA commends the great work achieved by all stakeholders, noting that the process started out with interested parties having differing views and priorities. The pandemic brought an additional layer of complications. CUDA says that the published Bill is an example of what can be achieved through meaningful cooperation.  CUDA would like to take the opportunity to express its appreciation for the productive contributions of Minister of State, Séan Fleming TD, Minister for Finance, Pascal Donohoe TD, the team at the Department of Finance led by Brian Corr, the Registrar of Credit Unions, Elaine Byrne, and her team at the Central Bank, and our colleagues in CUMA, ILCU and NSF.

CUDA looks forward to the speedy implementation of the legislation to ensure credit unions can continue to deliver their first-rate service – ensuring the best outcomes for credit union members, their communities and the wider Irish economy.

Sep 25 2022

Credit Union (Amendment) Bill a priority in Government Legislation Programme

By News

The Government Legislation Programme was published on 14th September and sets out the agenda of new legislation for this Autumn Session 2022. CUDA is delighted to note that the priority legislation for drafting and publication during this session includes the Credit Union (Amendment) Bill. This will give effect to the proposals that have emerged from the Review of Policy Framework of Credit Unions. It is ten years since credit union legislation was amended.

At a time when there is a significant housing challenge, a climate change crisis, a looming pension crisis and large-scale bank branch closures Government cannot solve these alone. CUDA believes that there is a real fit between key elements of Government priorities and the future role of Credit Unions.

Credit unions have the funds and the market reach – our unique ownership model means benefits flow back to Members and Communities. The new proposals will facilitate real collaboration occur between credit unions. Each credit union is a separate legal entity with its own board and management team, and up to now they are not permitted share business. These changes will permit credit unions to collaborate to introduce loans to each other and collectively share loans. They will be able to establish a credit union for credit unions and have greater opportunity to invest in credit union owned service organisations. These changes will help Credit unions make a greater financial, social and environmental contribution as their legislation framework is modernised.

Allowing credit unions to do more business through these changes, this could effectively see their lending double increasing from €5.5bn to over €10bn.

We will also welcome guidance from the Minister of State at the Department of Finance on how credit unions can qualify to become distributors of State Savings products as this would be an opportunity to broaden the savings options that credit unions can offer.

We look forward to continuing contributing to the good work that is ongoing and would ask all members of the Oireachtas to support and enact these overdue changes. To bring all this good work into existence we need the Central Bank to ensure that they implement regulations that will enable the changes to the credit union law that then enables them to get on with delivering real competition and choice for people throughout Ireland.

Sep 06 2022

Just 6% believe banks will retain cash services “indefinitely”

By News

Majority believe that buck stops with Government and Central Bank for cash-banking in local communities

 Despite the public and political backlash to the recent attempts at branch closures and the withdraw of cash services by AIB, the vast majority of people believe that it’s only a matter of time before local banking services, including cash, are significantly curtailed.

A new survey, commissioned by Credit Union Development Association (CUDA) and undertaken by iReach, reveals that as many as 60% anticipate that cash services in banks will be removed in time, with just 6% believing banks will retain these services indefinitely.

The survey of 1,000 people nationwide also found that over half (56%) believe that the responsibility to retain cash services should be centrally positioned in the hands of the Government and/or the Central Bank.

Kevin Johnson, CEO of CUDA spoke of the findings,

“It seems that many people feel we are on borrowed time in terms of the rollout of digital banking and the withdrawal of face-to-face banking services, with 60% of respondents feeling that AIB’s decision to retain cash services is only temporary.

Just 6% of respondents believe that cash services as they currently exist will survive indefinitely, with a further 15% feeling that while they believe cash services will be retained, we will have to pay a lot more for them.

It is very much a sign of the times we are in, and the shift to digital banking, that one of the fundamental purposes of the banking system as we know it – namely the circulation of cash – is under threat of becoming redundant. There are many sides to the argument – some people will argue that digital is the way forward and a cashless society is the next logical step. Others will maintain that a solely digital-based banking system would only serve a certain sector of society, would skip a large swathe of people who don’t have the requisite skillset to adopt it, and leave the economy over- exposed to a major cyber-attack.”

Recent statistics from Eurostat1 found that there are 275,000 people in Ireland over the age of 65 who are not using the internet.

Mr Johnson commented,

“That’s a hugely significant demographic and sector of our society. Most of these people require access to banking services and expressly, to cash banking services and a walk-in branch. The prospect of national banking service providers orientating their business development in such a way as to potentially disempower over a quarter of a million people requires serious consideration at Government level, and requires policy making that mitigates such negative societal impacts and detriment – particularly for older consumers.”

The CUDA survey also questioned respondents as to who they feel responsibility to ensure that local communities retain access to cash-banking should fall to, with a third believing that it should remain the responsibilities of the banks to retain services.

 

 

 

Mr Johnson continued,

“Here we see that the majority (56%) believe that the buck stops with the Government and the Central Bank to ensure that people have access to cash banking services in their local communities. A further 30% believe that it’s up to the banks to ensure that local communities have such services.

These numbers are even more extreme amongst KBC and Ulster bank customers, with just 17% believing that it’s up to the banks and 72% saying that it’s up to Government and the Central bank to sort this issue.”

Mr Johnson concluded,

“The retention of cash services in local communities is critical and is a national issue that needs forward-looking centralised planning. In this regard, Credit unions would be happy to support the Government in developing a solid solution to ensure that consumers current and future needs are met.”

 

 

1 Eurostat: Individuals’ level of digital skills (until 2019) https://ec.europa.eu/eurostat/databrowser/view/ISOC_SK_DSKL_I/default/table?lang=en

 

ENDS

Note to the Editor

CUDA

CUDA, the Credit Union Development Association, was legally incorporated in 2003. In its early days, it acted as the representative voice for owner member Credit Unions, with legislators and regulators. The organisation has since evolved and in addition to providing a ‘voice’, has become increasingly engaged in providing support facilities in the areas of regulatory compliance, risk management, shared services and competency development.

CUDA is a Credit Union owned network that enables member Credit Unions to engage in beneficial activities which would not have proved possible to do as single stand-alone entities.

It manages the diverse interests of members to the mutual benefit of the network. In acting as a catalyst for the growth and development of Credit Unions, CUDA now makes many of its support services available to all Credit Unions.

 

 

Appendix

  1. AIB recently announced plans to remove cash services from 70 of its branches throughout the country. It has since reversed this decision following backlash from the public and Government.

Do you believe this reversal is:

  • Permanent – they will retain cash services indefinitely 6%
  • Permanent – they will retain cash services indefinitely but will increase their charges for cash transactions 15%
  • Temporary – they will remove cash services in time 60%
  • I don’t know 19%

 

  1. In your opinion, whose responsibility is it to ensure that local communities have access to cash-banking?
  • The banks– they should look after their customers 30%
  • The Government – to ensure that banks or an alternative provides this service 28%
  • The Central Bank – to ensure that banks or an alternative provides this service 28%
  • Nobody – we just have to move with the times 13%

 

 

 

Jan 19 2022

Central Bank Consultation – Application of Minimum Competency Rules to Credit Unions

By News

The Central Bank of Ireland has today (19 January 2022) commenced a public consultation on the application of the Minimum Competency Code 2017 and the Minimum Competency Regulations 2017 to credit union core services.

Commenting on the consultation, Kevin Johnson CEO of CUDA (Credit Union Development Association), stated ‘Credit unions have fully embraced the process of business innovation as evidenced by the fact that two-thirds of credit union staff now hold CUA and/or QFA  (Credit Union Advisor, Qualified Financial Advisor).

Many people not familiar with the sector may be surprised by the level of change that has occurred across credit unions with increased digital access, a wider range of lending products including mortgages and small business loans right through to special services like the end-to-end home retrofit scheme which has proven so popular.

Credit unions are still the recognised as the most trusted brand in the country and this is a direct consequence of how they treat people – with compassion and understanding.

During 2021, CUDA’s own Credit Union Director Programme focused on supporting directors across the country to develop key skills to better understand today’s more complex banking world and to enable them to deliver the most appropriate products and services to their members.’

Dec 17 2020

Central Bank provides update on the financial condition of the credit union sector

By News

It is welcomed to see that the Central Bank of Ireland (CBI) acknowledged the effectiveness of credit unions in maintaining continuity of services for their members during the ongoing pandemic, and that the sector has shown a level of resilience in 2020.

Commenting on the CBI release, Kevin Johnson, CEO of Credit Union Development Association (CUDA) stated, “Growing savings and a muted demand for credit are not challenges unique to the Credit Union sector, or indeed, to Ireland. Credit Unions have redoubled their focus on serving people with lending needs and also generating non-interest income.

Credit Unions that have digitised their loan marketing, membership and application processes have fared far better during the pandemic, with some seeing little or no reduction in overall loan volumes. Similarly, those Credit Unions that have signed up to the end-to-end home retrofit scheme ProEnergy, from the Solution Centre, are helping the high number of people investing in their homes over the last few months.

A collaboration of Credit Unions, led by CUDA, have weathered this storm better than many, by using digital innovation as a means of reaching a broader audience, by addressing market needs with schemes like the home retrofit initiative, and introducing new value products for people that also generate income for the credit union (home, life and travel insurance).

If Credit Unions are to maintain their strong capital position, further innovation will be required and CUDA are advocating specific reforms and improvements to facilitate serving more lending needs and also ways to facilitate members savings in a safe environment.  CUDA are urging the Government to consider permitting Credit Unions to introduce their members to State Savings, where savings are placed directly with the Irish Government.  This would alleviate the capital pressure for Credit Unions, as the savings would no longer be on their balance sheet, while allowing them to continue to deliver important services to their members.  We are also seeking legislative change to support the introduction of co-lending which would enable a group of Credit Unions to share the risk for some of the larger loan opportunities.”

Kevin Johnson, CEO of CUDA (Credit Union Development Association)

Jul 04 2016

Credit Unions call for Dublin differentiation, a ‘No Equity’ category and an LTI of 3.75 in Central Bank mortgage rules review

By News

“Credit Unions shouldn’t be unreasonably prevented from delivering competition to drive down mortgage rates”

The Credit Union Development Association (CUDA) intend to present its submission to the Central Bank of Ireland ahead of its review of its macro prudential mortgage measures, in which it will call for three simple but equitable changes to the current rules for new mortgages.

At the same time, CUDA is seeking to have the long-term credit union lending limits removed or substantially changed as it believes that they are unduly restricting competition in the mortgage market. The representative body says that Credit Unions are massively under lent with billions of Euro currently available. They contend that delivering greater competition to consumers could finally see standard variable rates (SVR) drop below 3%.

Presently, credit unions are generally only allowed to lend 10% of their loans, on terms of 10years or more. CUDA believes that this rule should be removed as there are plenty of other prudential regulatory controls in place to ensure the solvency of those credit unions that wish to lend more over the long-term.

Lending a greater proportion of funds over a longer period would also enable credit unions to offer enhanced long-term savings products with higher interest rates.

Mortgage rules review

CUDA is calling for a change in the Loan to Income (LTI) limit which currently stands at 3.5 times. The Credit Union representative body will ask the Central Bank of Ireland (CBI) to allow for a slight increase in the LTI – to allow people borrow up to 3.75 times their income. The Solution Centre, a CUDA managed innovation business unit, has researched the issues in anticipation of a new mortgage offering and believes that this relatively small change could significantly boost the number of couples on average income that qualify for a typical starter home particularly in Dublin where prices are so much higher.

A new starter house in Dublin typically costs €300,000 and most people reasonably assume that first time buyers will need a €38,000 deposit under the Loan to value (LTV) rules – 10% up to €220,000 and 20% on the balance. But even assuming a higher than average household income of €70,000, the current LTI of 3.5 will mean that they will need a much bigger deposit of €55,000  regardless of whether they qualify for the lower First Time Buyer exemption under the LTV rules.  If the LTI is raised to just 3.75, this would reduce the deposit required to €37,500 which is still a sizeable deposit, however it is more comparable with the €38,000 LTV deposit requirement.

CUDA’s submission will also suggest that the categories of First Time Buyer (FTB) and Trader-up (TU) should be changed to reflect the financial environment in which we currently live. They contend that when these phrases were first coined, it was assumed that while applicants might have had savings, FTBs didn’t have any equity from a previous home while TU’s always did. So the rules were softened for FTBs to give them a better chance. Unfortunately, many families in their 30s, 40s and 50s are now in the TU category – looking to trade up to a bigger \ family friendly house, however, having bought just before the downturn, they don’t have any equity to carry from their current home. CUDA is advocating that buyers should instead be categorised by ‘Equity’ and ‘No Equity’.

CUDA also believes that the mortgage lending limits in Dublin and other large urban areas need to reflect that it is a wholly different market to the rest of the country, with much higher purchase prices and far higher rental prices.

According to Kevin Johnson, CEO of CUDA, “we know the demand is there, but many people cannot meet the new rules because of Loan to income (LTI) rule. While Loan to value (LTV) limits are spoken of far more in the media, we believe that a small modification to the LTI rule would have a bigger impact without causing an undue spike so as to avoid any significant pressure on house prices.

The loan caps have had the, perhaps unintended, but negative consequences of forcing more and more people to remain in rental accommodation in big cities particularly Dublin which is putting upward pressure on rental rates. The increase in rents has been a significant contributor to the homeless crisis as people on rent support or supplement are unable to compete with the private sector for increasingly reducing number of properties. CUDA believes that the current Central Bank rules are contributing to slowing the migration of people from rental to purchase, which is having a knock on impact on everyone else in the rental sector.”

Credit Union Mortgage lending limits – Competition

CUDA is also engaged in a campaign to have the outdated long-term lending limits reviewed and modernised to more accurately reflect consumer demands and the current financial environment.

According to Kevin, ‘We believe that Credit Unions shouldn’t be unreasonably prevented from delivering competition to drive down mortgage rates. The current credit union limits are arbitrarily capped at 10% of all lending, a crude measure introduced many years ago that is now out of date. The Central Bank has indicated its desire to see more completion in the mortgage market; we believe that this is the best way to achieve it.’

CUDA

CUDA, the Credit Union Development Association, was legally incorporated in 2003. In its early days it was the representative voice, on behalf of its owner member credit unions, with legislators and regulators. It has since evolved and now, as well as providing a ‘voice’, it is increasingly providing support facilities in the areas of regulatory compliance, risk management, shared services and competency development.

 The Solution Centre

A select group of the country’s strongest credit unions led by the CUDA established The Solutions Centre, a hothouse unit developing specialist products, supports and solutions. One of the first of these products will be supporting a mortgage offering which is expected to be available in July to participating credit unions representing approximately 25% of credit union members.