The prospect of some of Ireland's credit unions soon offering mortgage loans to their members will evoke a mixed response. The Irish League of Credit Unions (ICLU) is actively considering the matter with its members. House buyers will, undoubtedly, welcome more competition in the mortgage market but others – including the Central Bank as primary regulator – will have obvious concerns about such a move at this time.
Credit unions were among the high-profile casualties of the financial boom and bust, thanks both to inadequate regulation of their operations, and their reckless lending practices. Some, most notably Newbridge Credit Union, incurred huge losses, and had to be rescued by the State. The Central Bank, by setting a tight regulatory framework for mortgage lending by credit unions – now under discussion – will be determined to ensure past mistakes are not repeated.
At present credit unions are not debarred from providing mortgage finance. But they are restricted both on how much they can lend, and for how long – generally 10 years. And, as the registrar of credit unions, Anne Marie McKiernan noted recently “more than half of all credit unions” are still subject to some form of lending restriction. Clearly, the financial health of the credit unions remains a matter of continuing official concern, not least given the weak state of the general mortgage market – where one in six mortgage holders remain in arrears on their loan repayments.
The problem in the housing sector is not a shortage of demand, but of supply. Too few houses have been built since the financial crisis. And limited supply has pushed up prices, and made house purchase more expensive for first-time buyers, as their incomes have failed to keep pace. However, the arrival of a new lender – the credit unions offering mortgage finance to members – will do little to change that. For without some increase in housing supply first occurring, then any extra mortgage finance will only serve to push up prices, and make house purchase a less affordable option for many.