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New rules will allow all credit unions to make mortgage offer

By News

Landmark regulatory changes coming in during 2025 will mean every credit union in the country will be able to offer mortgages, business loans, current accounts and debit cards.

The changes are coming about due to the enactment of the Credit Union (Amendment) Act 2023, a piece of legislation that is set to transform the sector, according to Helen Carbery, the new chief executive of the Credit Union Development Association (CUDA), a representative body for the lenders.

She said: “We are at a landmark moment in the evolution of the role and value of the credit union sector in Ireland.”

The regulatory changes for credit unions coming in under the Credit Union (Amendment) Act 2023 was one of the most important pieces of credit union legislation to ever be developed, she said.

It will transform the whole credit union landscape, she added.

“It is thanks to this new legislation that for the first time ever, all credit unions will be able to offer a service or product such as a mortgage 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, business loans, current accounts and debit cards.

Ms Carbery said smaller credit unions will be able to offer these services by essentially partnering with other credit unions or through credit union shared organisations.

“Importantly, the legislation enables credit unions to maintain their independence and uniqueness while they partner with others to provide the services needed by their members,” she said.

The act also modernises governance structures and reduces operational burdens on volunteer boards to enable credit unions to play a more active role in areas such as housing, SME lending, and environmental sustainability. The Credit Union (Amendment) Act 2023 also introduces the concept of the corporate credit union.

Often described as a central credit union or “a credit union for credit unions”, a corporate credit union would support collaboration between credit unions, and enable them to better manage their resources and expand their lending capabilities, she said.

Ireland is not alone in grappling with how to regulate a diverse credit union sector. In countries such as Canada and Australia, regulatory systems have successfully enabled credit unions to thrive while ensuring appropriate oversight, Ms Carbery said.

The next phase of the implementation of the Credit Union (Amendment) Act 2023 includes the drafting of new regulations for the development and operation of a corporate credit union by the Central Bank of Ireland.

This will be done in consultation with the credit union sector.

“This is a very exciting development in the year ahead as it could pave the way for credit unions to gain greater access to funding and more opportunities to expand their offerings.”

Ms Carbery has just taken over as head of CUDA following the retirement of Dr Kevin Johnson from the role.

In her recent speech at the Credit Union Annual Conference in Killarney, the outgoing deputy governor of the Central Bank, Sharon Donnery, said the focus should allow it to seize the opportunities that the various credit union regulations have presented.

Ms Donnery said that since 2014, the number of credit unions overall has halved and the number of large credit union has more than doubled. Total assets in the sector have grown by 50pc from €14bn in 2014 to just over €21bn in 2024.

She said credit union reserves have strengthened over the last decade and total loans have grown by 73pc in the same period.

Ms Carbery said to increase their loan book, the credit sector is focused on how to remain relevant to their communities with useful and attractive offerings.

CUDA Comments on the Central Bank of Ireland’s Public Consultation on Proposed Lending Limit Changes

By News

Commenting on the Central Bank of Ireland’s public consultation regarding significant changes to lending limits and underwriting requirements following the enactment of the Credit Union (Amendment) Act 2023, Kevin Johnson, CEO of the Credit Union Development Association (CUDA), said:

“we are pleased that this modernising of the lending framework regulations for credit unions is in line with our request submitted to the Central Bank of Ireland in February ’24.

The Credit Union (Amendment) Act 2023 was designed to give credit unions greater flexibility, enabling them to engage in loan participation and syndication, which allows lending risks to be shared among credit unions. The combination of the legislation and these proposed regulatory changes mark a major step forward for the sector, empowering credit unions to enhance their offerings in both the mortgage and business lending markets. A significant move towards our vision where everyone in Ireland will have access to all Credit Union services​.

Credit unions have already begun to account for a growing share of mortgage switches. With these enhanced lending limits, more credit unions will be attracted to helping members finance their home purchase and collectively the sector is  poised to more than triple their current mortgage loan books to over €2 billion in the coming years, further establishing themselves as strong contenders in the Irish mortgage market.

In 2017, the average credit union mortgage was approximately €110,000. Today, that figure has risen to over €200,000, though it remains below the banking sector average, which exceeds €300,000. Credit unions cater to a broader range of applicants, as reflected in the average household income of their mortgage holders, which is around €75,000—significantly lower than the €100,000 average for bank mortgage customers.

Business lending has also seen considerable growth across the sector, supported by the recruitment of specialists in this area. These enhanced lending limits and positive adjustments to underwriting requirements will enable credit unions to compete more intensively for business loans within their local communities.

Under the new legislation, credit unions will also be permitted to collaborate with one another to offer services such as home loans to members of other credit unions. For the first time, credit unions will have the ability to refer mortgage or business loan applications to other credit unions when they are unable to provide the loan themselves. This effectively means that every credit union in the country will be able to offer mortgages—a significant milestone for the sector.

The appetite for credit union mortgages continues to grow among the public, reflecting a clear demand for alternatives to traditional banks. Credit unions are stepping up to meet this demand by upskilling, modernising their offerings, and bringing much-needed competition to the market. For several years, regulators have encouraged credit unions to expand their lending, and the sector’s efforts are now bearing fruit.

The success of credit union mortgage lending was recently acknowledged by Sharon Donnery, Deputy Governor of the Central Bank of Ireland, who stated: ‘Over the years since these lending regulations were introduced, I am happy to say that our supervisory experience tells us that many credit unions in the sector have built this capacity, and they have prudently engaged in business and mortgage lending. 11% of Credit Union loan books are now in mortgages.’

Credit unions are uniquely positioned to drive competition and provide real alternatives in Ireland’s financial services market. These proposed changes will help credit unions continue their phenomenal growth in lending, further cementing their role as key players in the Irish financial landscape.”

ENDS

 

20% Increase in Consumers using Credit Union Services

By News

Following the publication by the  Department of Finance of the Consumer Sentiment Banking Survey Report today, Kevin Johnson, CUDA CEO said “We are delighted to see a 20% increase in the number of consumers using the services of credit unions (up from 30% in 2023 to 36% in 2024). With the widespread rollout of digital services across the sector and the increase of new products from current accounts to mortgage and business loans, this significant increase in consumers accessing our services isn’t that surprising.  

Furthermore, given the changes in the pipeline, we expect the numbers using credit unions to increase even more. This autumn for example will see Irish credit unions become an even stronger contender in the Irish mortgage market. Thanks to legislative changes signed last February, in the last three months of this year, 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 a mortgage themselves. As this will be the first time ever that credit unions will be able to do so, this will be a watershed moment for credit unions and one that will see them eat into more of the banks’ market share in the coming years.   

Credit unions will also be able to refer applications for other products to another credit union – such as business loans, current accounts and debit cards. Credit unions will essentially be able to partner with other credit unions to offer their members a wider selection of products. 

Ultimately, it will be consumers who will be winners if credit unions can eat into more of the banks’ mortgage pie – and indeed if more credit unions are used by consumers for their day-to-day financial services. Credit unions are member-owned financial institutions, so each credit union is essentially owned by consumers, with consumers at the heart of the decisions made by these organisations. This is one of the reasons credit unions can be relied on to provide affordable financial services to their members, with any surpluses reinvested to benefit their members.”

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

CUDA comments on CBI Financial Conditions of Credit Unions Report

By News

Commenting on the ‘Financial Conditions of Credit Unions’ report, published by the Central Bank this morning, Kevin Johnson, CEO of CUDA (Credit Union Development Association) said “This morning’s report shows that lending is strong across the credit union sector, with a 12pc increase in loans for the financial year ended 30 September 2023. Loan growth has continued into 2024 and this is reflective of the huge demand for credit union loans and the increased ability of credit unions to meet this demand across multiple channels. Furthermore, thanks to legislative changes signed last February, we expect the scale of credit union lending to significantly increase in the coming months and years – because from September 2024, for the first time, credit unions will be able 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. For householders and aspiring homeowners, this means there will be greater access to fairer mortgages as credit unions will be able to refer mortgage applications to other credit unions should they not be in a position to provide a mortgage themselves. This effectively means that every credit union in the country will be able to offer mortgages. As a result of these changes, CUDA contends that total new credit union mortgage lending could reach €1 billion per annum by 2027, which could put credit unions in the top five mortgage lenders.

Furthermore, the Credit Union Regulatory Lending Framework review is ongoing in the Central Bank at present and is due to be published by the end of June. On foot of this review, we would hope going forward that further changes will be implemented which will permit credit unions to lend more.

While after falling to a seven-year low the last time this report was published[1], the slight increase in arrears captured in this morning’s report is a sombre reminder of the pressure that the increased cost of living has brought on people. Credit unions are very cognisant of this and continue to remain supportive of anyone who is experiencing difficulties.  We believe the low increase is testament to the competitive interest rates available from credit unions as well as the work that credit unions do with any customers who may run into difficulties repaying their loans.

This morning’s report also shows that there’s been an increase in reserves across the sector, with all credit unions reporting regulatory reserves that are comfortably above the required regulatory minimum. This is evidence of prudent financial management by credit unions – which in turn underpins member confidence and enables credit unions to expand on their service offerings and continue to win more of the mortgage and lending pie from the Irish banks and non-banks alike.”

 

ENDS

 

[1] As per Financial Stability Report for financial year to 30 September 2022, published in March 2023

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

Comment from Dr. Kevin Johnson, CEO of the Credit Union Development Association (CUDA), on key changes coming into force today February 21, 2024 as a result of enhancements to the Credit Union Act

By News

Credit unions processed approximately €200m in new mortgage lending in 2023. As a result of the legislative changes which came into force today, we anticipate this volume doubling each year for the next couple of years. We believe the credit union mortgage lending could reach €1bn per annum within 3 to 4 years which could put credit unions in the top 5 mortgage lenders.

For the first time, credit unions can now 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. For householders and aspiring homeowners, this means there will be greater access to fairer mortgages as credit unions will be able to refer mortgage applications to other credit unions should they not be in a position to provide a mortgage themselves. This effectively means that every credit union in the country will be able to offer mortgages.

Credit unions can also refer applications for other products to another credit union – such as current accounts, debit cards, and business loans. Credit unions can now essentially partner with other credit unions to offer their members a wider selection of products.

This new collaboration on lending could generate an additional €2.2bn in lending each year for credit unions.

Credit union members will have more access to digital and automated services as a result of the enhancements to the Credit Union Act. This increased digitalisation will generate cost savings for credit unions in a number of areas. For example, the ability to make credit union annual reports available online will save credit unions an estimated €75m a year in postage and printing costs (see Appendix). All of these cost savings will then be used to deliver even better and lower-cost products to our members.

In addition, increased digitalisation will make it easier for credit unions to sign up new business members, and lend to these businesses– in this regard, we estimate that digitalisation will boost business lending alone by €100m a year.

The changes that come into force today (February 21, 2024) are just the first of a suite of enhancements to the Credit Union Act in the pipeline. Other changes in the pipeline are the establishment of credit unions for credit unions (aka Corporate Credit Unions) and the ability of credit unions to invest in shared services – these will help credit unions provide maximum efficiency for their members by sharing costs and expertise. This in turn will enable credit unions to offer a wider range of lower-cost loans and other products to their members, as well as more favourable returns on savings.

ENDS

 

Appendix

 

 

 

 

CUDA comments on the CBI Report on Financial Conditions of Credit Unions

By News

The Central Bank of Ireland have today (30th March 2023) published its ninth edition of the Financial Conditions of Credit Unions Report.

Commenting on the Central Bank’s report on the Financial Conditions of the Credit Union sector, ‘Kevin Johnson, CEO of the Credit Union Development Association, which works with over 50 credit unions, said

“Loan volumes are up, and the loan-to-asset ratio is definitely improving, but not by as much or as quickly as we would like. We believe that there’s an absolute need to resolve this by expanding the loan profile of credit unions and prudently growing loan books across the sector.  

Competition in the mortgage market has reduced following the departures of Ulster Bank and KBC, and with the non-banks struggling to offer competitively priced products, there’s a clear opening for credit unions to substantially expand their mortgage products. CUDA has been at the forefront of this, with its members initially entering the mortgage market in 2018 targeting specific lending needs, since 2021 we have worked with credit unions to expand their offerings and we are now working to expand this to more credit unions. 

New legislation that is progressing through the Oireachtas and scheduled for enactment this year will support this, as it will allow credit unions to refer lending business to each other which means that even those credit unions without mortgage lending underwriting skills will be able to facilitate their members. 

Each credit union is a separate legal entity with its own Board and management team, and they are not currently permitted to share business. These changes will help credit unions make a greater financial, social, and environmental contribution as their legislation framework is modernised.

Credit Unions have significantly modernised in the past decade – their structure, legal and regulatory status, product offerings, and service delivery methods have advanced considerably. In particular their digital capabilities were accelerated during the Covid-19 pandemic. Members can still access the traditional set of personal loans and savings, and now they can also avail of current accounts, ‘one stop shop’ retrofit loans, mortgages, revolving credit, debit cards, community loans, agricultural loans, as well as loans for small businesses.  These are accessible face to face, over the phone or via online facilities.  Recent rises in interest rates will have a significantly positive impact on the ROA for all credit unions as this will result in them getting a better return on their investments.”