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Credit unions are taking on banks with some of the lowest mortgage rates in the Irish market

Credit unions are taking on banks with some of the lowest mortgage rates in the Irish market

The member-owned credit unions are ramping up their mortgage lending in an effort to broaden their offerings, raising hopes that they can challenge the dominance of the banks. Loan rates as low as 2.95 percent are now available from some credit unions, which is well below three mainstream banks or non-bank lenders.

A large analysis of the mortgage offer by sector carried out by the Irish independent shows that nearly half of the state’s 205 active credit unions now offer mortgages, both to first-time buyers and switchers.

The analysis showed that mortgage lending by the sector is growing rapidly, up some 27 percent last year, with reserve lending capacity of a further €2 billion.

While they have only a small presence in the mortgage market so far, experts said credit unions are on the verge of taking over the big banks when it comes to loans for home purchases and switching.

The three largest banks control 90 percent of the mortgage market.

A number of credit unions have both variable and fixed rates of around 3%, and a larger number offer rates of 4%. This contrasts with two of the non-bank lenders, ICS Mortgages and Finance Ireland, which have variable interest rates above 6%.

Meanwhile, credit union rates are unaffected by movements in European Central Bank (ECB) interest rates.

Credit union mortgages are funded by the savings of its members, and each credit union sets its own rates to earn a reasonable rate of return, rather than generate a profit.

Some mortgage rates offered by credit unions are the lowest on the market.

St Canice’s Credit Union, serving Kilkenny and parts of Carlow and Laois, has a three-year flat rate of 3.15 per cent.

Cork’s Youghal Credit Union has a variable rate of 2.9 pc.

Member First in Dublin has a five-year flat rate of 3.2 pc.

St Raphael’s Garda Credit Union has a variable rate of 2.95 pc. It said it had no plans to raise the rate.

Education Credit Union, for those in secondary education and their families, has a variable rate of 2.75 percent, the lowest of any mortgage lender on the market.

St Jarlath’s Credit Union in Galway offers a variable of 3.99pc.

According to David Malone, CEO of the Irish League of Credit Unions, the sector has around €2 billion in additional borrowing capacity.

He said: “We are aiming for a national footprint in mortgages. And credit unions offer mortgages at competitive rates.”

When Doddl.ie’s broker Martina Hennessy showed the range of mortgage rates charged by credit unions, he said, “These particular rates are competitive rates against the market.”

On this day in history May 17

Kevin Johnson, head of the Credit Union Development Association (CUDA), another representative body for the industry, said the number of people switching their mortgages to credit unions has grown dramatically since the start of the year.

“If you’re paying a high interest rate on your mortgage, or if you’re about to get a mortgage to buy your home, consider contacting your credit union to see what’s offered,” he said.

Mortgage broker Michael Dowling, who is also president of Malahide Credit Union, said smaller credit unions like his weren’t offering mortgages because they were unable to get a mortgage.

But the 2022 Credit Union (Amendment) Bill, which passes through the Oireachtas, would allow credit unions to refer members to other credit unions if they don’t offer products like mortgages, he said.

Anyone who gets a mortgage from a credit union is subject to the same central bank loan-to-income and loan-to-value lending restrictions that apply to banks.

People can only apply to the credit union if they live in the area it operates in, or have a job where there is a credit union for the workforce.

And experts pointed out that each credit union sets its own mortgage rates.

There are no figures on the mortgage market share of credit unions.

But the Central Bank said in March they had the potential to increase mortgages and corporate loans to $2.1 billion if all credit unions with total assets over $100 million signed up to maximize their long-term lending.

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