Mortgage lending by credit unions up 15% last quarter

Credit unions mortgage lending saw a “significant increase” in the final quarter of last year, as the sector’s total mortgage book surpassed €500 million.

Mortgage lending increased 15 per cent during the final three months of 2023, according to the latest quarterly results for members of the Irish League of Credit Unions (ILCU) which represents almost all active credit unions in the Republic of Ireland.

The results for October to December 2023 show an overall 2.2 per cent increase in lending by credit unions during the quarter, compared with growth of 0.9 per cent in the same quarter of the previous year.

More than 112,000 new loans were issued in the quarter, up 4 per cent on the same quarter a year previously. The total loan book of ILCU members stood at €5.41 billion at the end of last quarter, up 13.2 per cent year on year.

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The increases in lending are in the context of “exceptionally low” arrears of 2.7 per cent among credit unions, compared with an overall 90-day mortgage arrears ratio of 4.1 per cent reported by the Central Bank in December.

David Malone, chief executive of the ILCU, said there is a growing pipeline of demand for loans, and that credit unions should be allowed to compete on a level playing field with traditional lenders. He noted the imminent partial commencement of the Credit Union (Amendment) Act 2023 and the Central Bank’s review of the lending framework.

“We have engaged with the Central Bank on its lending review but are now looking for targeted changes to allow more choice for consumers and to reduce the dominance of the retail banks. The changes we are looking for will allow more mortgages, remove crisis-era restrictions and allow more business loans thereby enhancing competition in a safe and prudent manner,” he said.

ILCU-affiliated credit unions held €18 billion in assets at the end of December 2023, up 2.6 per cent year on year, and up more than 40 per cent in the past decade.

Savings in ILCU-affiliated credit unions increased by 2.1 per cent year on year to €15 billion by the end of December. This is down from 6.1 per cent savings growth during the pandemic in 2020, but an increase on 1.3 per cent growth in 2022.

The pandemic saw a significant increase in household savings which coincided with low or negative bank interest rates, limiting returns credit unions could achieve on investments. At the time, and even before the pandemic in 2019, credit unions were forced to introduce savings caps in order to limit the inflow of savings from members.

The ILCU has said that as the European Central Bank has increased interest rates, “the pressure on credit union investments has lessened”, and a number of credit unions have now increased or removed savings caps. It added that this is a decision for each credit union to make at local level.

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