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Registry of Credit Unions

Dec 11 2024

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

 

May 28 2024

CUDA welcomes the publication of the ICURN report

By News

CUDA welcomes the publication of this awaited ICURN peer review report. It contains several key recommendations which the Regulators Network believes will improve the effectiveness of compliance within credit unions. We note that the report considers the financial performance of credit unions up to year-end 2022, and therefore does not have the benefit of the improvements achieved in 2023.

From our initial read of the report, we welcome suggestions calling for the CBI to update aspects of the Credit Union Handbook related to operational risk, fraud reporting requirements, and increase engagement with credit union boards and staff on risk management practices.

We particularly welcome the suggestion for further development of the Regulatory Framework to accommodate the growing diversification of credit union business lines, provided credit unions demonstrate the necessary capability and competence. This involves acknowledging and supporting the expanding roles and services offered by credit unions while ensuring they remain within a safe and sound operational framework.

The report notes that the CBI “remain of the view that there is no rationale to change to a risk weighted approach” for determination of capital which is disappointing and this ties up excessive capital. That said we look forward to working with the CBI on their ongoing lending framework review and the associated liquidity regulations. CUDA maintains that a ‘One size fits all’ regulation approach damages both large and small Credit Unions, a new model is required for the sector to sustain and achieve its full potential.

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