Keep bank levy and use it to tackle mortgage arrears, says credit union

The call by the Irish League of Credit Unions comes as it emerged that a leading Dublin credit union is offering to take on the mortgages of some of those who are prisoners of vulture funds.

Core Credit Union, which is in merger talks with neighbour Progressive, is targeting people who are trapped as they cannot access fixed mortgage rates.

They are being hit hard by European Central Bank rises as they are on trackers or variables.

Core chief executive Michael Byrne said the switcher product for vulture prisoners was not the most competitively priced on the market, but it has some key features that will be unmatched.

It has a 5pc fixed rate for the duration of the mortgage. And there are no penalties or charges for paying off the mortgage early. Core will consider those with historic arrears.

Mr Byrne said: “These are understandable and what we will look for in our underwriting is evidence that the person was engaging.”

He said if there are recent arrears that have occurred due to increased interest rates this is understandable, and won’t rule out a switch.

Some people trapped with vulture funds are now being charged up to 9pc, pushing these people into defaulting on their payments.

Mr Byrne added: “The key underwriting criteria is, ‘can the member afford today’s repayments on the refinancing of today’s loan balance?’ We always look for a reason to give the loan.”

Other credit unions are understood to be considering switchers from people whose mortgages are serviced by the likes of Pepper and Start.

Meanwhile, the Irish League of Credit Unions has told Finance Minister Michael McGrath that the banking levy should be retained and used for consumer protection issues.

Chief executive of the league, David Malone, said the levy should be retained and the funds used to address the legacy of longer-term mortgage arrears.

In a submission called for by the Department of Finance on the future of the bank levy, the league said this would be in line with an approach advocated by the International Monetary Fund.

“This [bank levy] fund could allow limited debt relief, debt restructuring or indeed innovative solutions under the framework offered by the Insolvency Service of Ireland that we believe has not been used to its fullest potential to deal with legacy mortgage issues.”

Mr Malone said this could allow banks to buy back restructured mortgages from the vulture funds they were sold to and give the homeowners “potentially lower rates that would enhance consumer outcomes”.

Part of the bank levy is to be used to fund the recommendations of the recent Retail Banking Review to ensure consumers have access to cash.

That review called for a limited fund to be provided for all financial institutions to ensure that market participants are incentivised to preserve access at December 2022 levels.

The banking levy was introduced in 2014.

In April, Mr McGrath launched a public consultation on the future of the levy.

The levy raises around €87m a year, down from the original €150m as Ulster Bank and KBC Bank Ireland are no longer paying it.

They have been exempted by the Government as they are in the process of exiting the market.