Tag

credit unions

Apr 10 2021

Ireland’s Credit Unions on target to retrofit 2,000 homes in 2021

By News

Credit Unions secure grant funding support from SEAI for unique end to end survey and finance package

“Credit Unions are best placed to become primary source of finance for nationwide retrofit project”

The Credit Union Development Association [CUDA], which currently runs Ireland’s first end-to-end home retrofit scheme – ProEnergy Homes, has partnered with Retrofit Energy Ireland (REIL) to secure grant funding support from the SEAI and has announced an expansion of the popular scheme, opening it up to all other credit unions.

CUDA report that, such is the demand from participating credit unions, half of the 2021 SEAI €1.5m in grant aid is already allocated, but as part the agreement, it is anticipated that additional funding will be sought in the second quarter.

The Pro Energy Home Scheme was first piloted by CUDA in early 2019 across 20 credit unions and was quickly oversubscribed. The scheme has proven popular as it takes all the “leg-work” away from the homeowner. Homeowners simply fill out an application form with their local participating credit union, after which REIL conducts an assessment on their property and present them with a report.

Kevin Johnson, CEO of CUDA explained why the scheme is so popular with homeowners,

“As the trusted provider of financial services in communities throughout Ireland, credit unions are uniquely positioned to support the delivery of a one-stop-shop model for home energy retrofits.

A national project management firm (REIL) is appointed to oversee all surveys and works, grant funding of up to 35% is available from SEAI for all qualifying works and low-rate financing is made available for the balance of costs through the applicant’s local credit union.  To-date public demand for the scheme through participating credit unions has been strong, demonstrating people’s appetite for a ‘one-stop-shop’ model.

Based on the current level of interest from credit union members and the number of credit unions signing up to the scheme, we’ll need to look for additional funding shortly and can envisaging the annual level of grant application running at €6m – €10m.”

According to Josephine Maguire of SEAI,

“The SEAI recognises that access to finance can be a barrier to residential retrofitting so we are pleased to once again support credit unions in delivering the ProEnergy Homes scheme that provides access to finance at competitive rates to their Members. The SEAI has supported the ProEnergy Homes scheme for a number of years and the one-stop-shop model has proven to be a case study for the delivery of residential retrofitting at the ambitious scale targeted in the National Climate Action Plan.”

Commenting on the partnership, Minister of State with responsibility for Financial Services, Credit Unions and Insurance, Sean Fleming TD said “Credit Unions are uniquely positioned to support retrofitting plans in local communities across Ireland. I truly believe that the expansion of the ProEnergy Homes scheme, and similar schemes, will be a boost for local communities and will help the Government achieve its climate action targets.”

The Pro Energy Home Scheme model combines everything an applicant will need under a simple, unified process including an independent home survey report setting out their options, a dedicated project manager to arrange contractors, quality assurance on the works completed, access to low-rate credit union loans to finance the works.

CUDA say the scheme has now been tweaked slightly in response to the pandemic. Home surveys and works will resume as soon as it is safe to do so, but in the interim, a team of expert project managers and surveyors are available for telephone consultations with interested applicants. The ‘free and no obligations’ call-backs can be requested from www.proenergyhomes.ie and applicants will have the opportunity to discuss all their available options and receive professional advice on any technical questions they may have.

The average amount spent is about €14,000 made up of grant, savings and borrowings. The most popular measures undertaken in 2020 were external wall insulation, new glazing. Multi zone boiler controls also proved very popular. The scheme covers retrofits to a range of energy systems, including attic insulation, external wall insulation, the installation of solar panels, and upgrades to windows, among others.

Mr Johnson added, “Presently, SEAI grants will fund up to 35% of the cost of your retrofit. In our experience of running the scheme, the cost to the average household of bringing their home up to the recommended B2 level rating will cost approximately €30,000 – €40,000. So, just accounting for 35% of that cost through grant aid will leave a bill of roughly €26,000 for works. We recommend homeowners to use some saving to help lower the cost of any additional borrowing to cover the remaining bill, or indeed to cover the full cost of works, depending on how much they have saved. For example, take a cost of €40,000 to get a home to a B2 rating – the 35% grant will cover €14,000, which leaves €26,000 for the homeowner to cover. If they have €10,000 saved – this reduces the amount to be financed by a ProEnergy loan to €16,000.”

Mr. Johnson also welcomed the Governments clear commitment to supporting upskilling and job creation nationally as demand grows for retrofitting projects,

“As community organisations, credit unions are anxious to support local tradespeople. CUDA supports the Government’s announcement of four new centres of excellence to train 2,000 people in retrofit skills[1]. Upskilling existing tradespeople nationally will allow for job creation across the country and will support local economies while ensuring competition keeps prices and exchequer funding to a minimum.”

[1] https://www.gov.ie/en/press-release/16253-minister-harris-announces-four-new-retrofitting-centres-of-excellence/

Mar 01 2021

BoI branch closure decision may see consumers move to Credit Unions in many Irish communities similar to other countries

By News

Commenting on the Bank of Ireland branch closures announced today, 1st March 2021, Kevin Johnson CEO of CUDA (Credit Union Development Association), said

“Today’s announcement will be felt by consumers in many towns and villages throughout the country. While there is undoubtedly a move towards a more digital offering in the financial services sector, there are still a significant cohort of people who are not ready to make that change. The migration of banks to self-service branches has been a difficult transition for many people – particularly older customers, many of whom still favour face to face interaction. However, today has taken this migration one step further, with people in the affected locations no longer being given even the self-service option.

While Credit Unions have made great strides in terms of digital developments, the community ethos means than maintaining a local community presence is integral for the movement. As with Ulster Bank’s planned exit, I believe the announcement today will drive more and more people across the country to becoming members of their local Credit Union so that they can avail of traditional banking through both digital and face to face means, a pattern we’ve seen in other countries including Canada and the USA.”

Feb 18 2021

Rumoured exit from Ireland of Ulster Bank

By News

Commenting on Ulster bank’s rumoured exit, Kevin Johnson CEO of CUDA said, 

Consumers are going to be badly hit if Ulster Bank does exit the market; unlike other countries such as Canada and the USA, Irish consumers have been over-dependent on a couple of large national banks and as a country, we have traditionally underutilised local banking and credit options.

The level of development by Credit Union in recent years might surprise many.  The vast majority of them have substantially modernised their operations and they are now well placed to provide banking and credit facilities to the thousands of personal and business customers impacted. While well known for their range of personal loans, most now offer current accounts, business lending, mortgages, Agri-loans, home, life and travel insurances, with a growing number offering Ireland’s only end-to-end home retro-fitting package. Reliable and efficient online banking is now the norm and the uptake from members has been strong.

With strengthened governance controls and growing business lending expertise, CUDA on behalf of its owner credit unions, is currently in seeking the Minister for Finance to amend legislation so that allow credit unions can co-lend on larger property related and commercial loans.

While much of the business of any departing bank may end up with the two largest banks, credit unions are now well positioned to step in and fill much of the credit void left behind.

 

 

Jul 15 2020

CUDA welcomes new Minister for State with specific Credit Union responsibility

By News

Credit Unions contact the new Minister offering support for rebuilding the economy at local and national level

Credit unions have warmly welcomed the appointment of Seán Fleming TD as Minister of State at the Department of Finance with responsibility for Financial Services, Credit Unions and Insurance.

Commenting on the appointment, Kevin Johnson, CEO of CUDA,

“We welcome the appointment of Minister Fleming and as he works through the extremely difficult challenges in his role, we believe that credit unions can play a vital role in supporting him and his Government colleagues with the rebuilding of Ireland’s economy. We have an increased range of lending products – consumer loans now complimented with home loans and business loans, and we look forward to working with Minister Fleming to further broaden the financial support that credit unions can offer members and their local communities.

We have written to Minister Fleming to share with him how credit unions can support him in achieving aspects of the Programme for Government and contribute to rebuilding the economy, both at local and national level”.

Nov 21 2019

New lending rules will finally allow Credit Unions to compete

By News

Survey – 3 out of 4 (77%) Consumers believe Credit Unions should compete more aggressively with Banks

  • Some credit unions poised to double or triple loan book size as a result of rule changes to longer-term loans
  • Credit unions disappointed at limited permission to become a key business loan provider and to support Government Housing Schemes

CUDA believes that the new rules which aligns the volume of loans a credit union can issue to their asset size is fundamental, and could enable many credit unions to double or treble their lending in certain loan classes.

Credit unions can and should ‘take on the banks’, according to more than 70% of Irish adults in a recent survey, commissioned by CUDA and conducted by iReach. The majority (74%) of adults believe that credit unions could make a bigger impact and should collaborate to compete with the banks.

Kevin Johnson, CEO of the Credit Union Development Association (CUDA), commenting on the new rules issued by the Central Bank of Ireland today, said  “Up until now the level of loans the credit union should give out was based on the percentage of loans already issued. This was holding credit unions back from providing more loans to support their members and their communities. Now the volume of loans will be based on a percentage of assets of the credit union. With an average of just 28% of assets currently lent out, the Regulations will allow many credit unions to do more loans for more people.

CUDA has persistently lobbied for these changes since 2015 and are delighted that these changes will bring much needed competition to the market for mortgages, home renovations and business loans”.

“We look forward to providing the wider range and higher volume of loans now permitted under the new rules and welcome the Regulator’s commitment to re-evaluating these limits as the sector evolves in these areas of lending. In particular CUDA believes credit unions are ready and willing to help do more in filling the void for business loans left by the banks”.

Kevin Johnson went on to express disappointment that credit unions will be prohibited from supporting aspects of Government Housing Policy such as the Repair and Leasing Scheme. There is no logic, he said, to prohibiting credit unions from providing much needed loans to their members who want to help rebuild Ireland through the Repair and Leasing Scheme. Kevin further expressed disappointment with the limit on the number of business loans a credit union can do in a time when many credit union members who are small businesses are crying out for funding.

CUDA is committed to getting solutions to these issues and will speak directly with the Department of Finance, Department of Housing and the CBI on these matters.

Kevin concluded, “It’s very encouraging to find that 59% of people aged between 18-34 either agreed or strongly agreed with the perception of credit unions being ‘dynamic and innovative’. We have made huge effort and investment in recent years to develop our work in line with advances in technology through our innovation hub, the Solution Centre. In the past three years we have introduced new lending products and these new limit rules from the Central Bank will allow us help credit unions further develop. Our Digital Marketing adverts reached 2.74m people so far in 2019, creating over 18,000 loan leads with a value of €102m. We are committed to broadening the appeal and relevance of the credit union movement among younger generations, and to making our services as accessible as possible, to as many members as we can, both old and new.”

-ENDS

 

Jan 15 2017

The future for Credit Unions – Kevin Johnson – Sunday Business Post – 15th January 2017

By News

Ireland’s credit unions must try to meet the needs of borrowers and savers by evolving

What’s uniquely interesting about credit unions is that the ‘problem’ is how to deal with, and build on, success. Credit Unions have approximately 3 million members, who continue to shrewdly save and have now amassed in excess of €12bn in savings. The challenge for credit unions is how to help their members who continue to build their ‘safety net’ through savings with a fair reward without putting these funds at risk – the latter of which is a shared objective with the regulator. Consistent with the objectives of the credit union, as enshrined in legislation, they also want to meet the borrowing needs of their members with a range of loans. This will ensure mutual benefit for savers and borrowers, by charging a fair rate to borrowers and paying a fair rate to savers.

Credit unions have embraced the enhanced governance framework, introduced in the Credit Union Act 2012 and subsequent regulations, at significant additional costs, but, as intended in the report by the Commission on Credit Unions, the quid pro quo of a more enabling tiered regulatory approach has not yet been delivered. It is worth noting that credit unions are more restricted now than prior to 2012 as a result of these new regulations – that’s not good for consumers, communities or their credit unions.

So what’s the way forward? There are several actions that can be taken to ensure the uniqueness of the credit union model is recognised by decision makers, while credit unions themselves can continue to evolve their capabilities;

  1. Establish a ‘Select Sub-Committee on Credit Unions’ from the Committee on Finance, Public Expenditure and Reform, and Taoiseach to play a key role in scrutinising the ongoing relevance of legislation, policy and related credit union matters;
  2. Introduce proportionate regulations, which will allow some credit unions to continue offering basic savings and loans only, while allowing other credit unions to develop and offer a greater range of services, provided they have what is necessary to manage the additional inherent risks.
  3. Amend the Credit Union Act ‘97 to allow credit unions lend directly to Housing Bodies for Social & Affordable Housing. This will let them meet their social objectives which will help counter balance any perceived loss of cohesion and identity as they get bigger;
  4. Reflect the importance of credit unions to the people of Ireland by having their regulator, the Registrar of Credit Unions, report directly to the Governor of the Central Bank of Ireland.
  5. Build on the successes of 2016, probably the biggest year of change in the credit union sector for decades, with considerable consolidation through mergers and the establishment of non-partisan collaboration groups such as the Solution Centre.

While CUDA will relentlessly continue to seek actions 1 to 4 above, action 5 means that credit unions offering a full range of financial services, from personal loans, mortgages, payments, investments, insurance and pensions, is now closer than ever before. We are seeing a rapidly increasing level of cooperation between credit unions, which initially focused on shared management service arrangements such as regulatory compliance and risk management, but has now expanded to significant projects supported with full risk analysis to enable a more expedient regulatory approval process facilitated through the formation of the Solution Centre, a hothouse unit developing specialist products, supports and solutions for credit unions and now has membership of credit unions who manage over one third of the assets of the sector.

Credit Unions who share the desire to develop their business model are collaborating through the Solution Centre and are starting to deliver a stronger and more forthright sector. This is good for consumers on so many levels – apart from ensuring fair interest rates and fees in the market, it allows people to be part of a highly-networked community focused on economic, social and environmental change.

It’s already working because initiatives are fully thought through; for example, in the case of the new mortgage support offering, a full assessment of all the steps in the process was completed and those credit unions utilising this resource will have ongoing access to specialist expertise. This should give confidence to regulators to extend the limits under which all credit unions currently operate.

Credit unions working together have the desire and the skill-set to develop and to become a real alternative to banks and other finance houses.  Credit unions have approximately €4billion out in loans, which is less than 30% of their assets, ideally this should be closer to 70%. This means they have a staggering €6bn available to lend.

So, what does all this development mean for credit union members? Anyone who joins will get improved, better tailored financial services in terms of mortgages, personal lending and savings, while also participating in a unique relationship with their credit union.  While members are often aware of how dependent they are on their credit union, it is actually an interdependent relationship. In practical terms, credit unions will improve their communications to ensure that members appreciate the co-dependent benefits of doing business with their credit union, and will not want or need to go elsewhere for their financial services.

Kevin Johnson

Chief Executive Officer

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.