Credit union mortgage lending surges and could hit €1bn by 2027

The locally-owned entities increased the overall lending they are doing but have the capacity to do more, the regulator for the sector said in a report.

Loans issued during last year by all the credit unions in the State totalled €3bn.

This took the total loans outstanding to €6.3bn in the year to last September, a rise of €400m.

It represents an increase of 12pc, year on year, a Central Bank report on financial health of credit unions has found.

There are 192 active credit unions in the State, but only around half of these offer mortgages.

Mortgage lending increased from €317m in 2022 to €484m last year.

This is an increase of 53pc, with the average loan size increasing from around €86,000 to €105,000, the Central Bank said.

One credit union representative body said total new credit union mortgage lending could reach €1bn a year 2027, which could put credit unions in the top five of mortgage lenders.

Chief executive of the Credit Union Development Association (CUDA), Kevin Johnson, said legislative changes signed last February mean that a credit union that is not in a position to offer a member a mortgage will be able to refer the member to one that does offer home loans.

Mr Johnson said he expects this will lead to a big increase in the scale of credit union mortgage lending.

“For householders and aspiring homeowners, this means there will be greater access to fairer mortgages as credit unions will be able to refer mortgage applications to other credit unions should they not be in a position to provide a mortgage themselves.

“This effectively means that every credit union in the country will be able to offer mortgages,” he said.

The Central Bank report found that business loans across the credit union sector increased from €146m in 2022 to €162m in 2023.

This was an increase of 11pc, with the average loan size increasing from around €20,000 to €22,000.

The Central Bank said: “Notwithstanding these increases in house and business loans, there remains significant capacity within the current lending concentration limits for further lending in these areas. This further capacity amounts to €900m, increasing to €2.1bn if all eligible credit unions availed of increased concentration limits available.”

But Registrar of Credit Unions Elaine Byrne, who is based in the Central Bank, warned credit unions that are issuing mortgages to ensure they have sufficient reserves in place.

She said: “Given the trends and the economic outlook, this is a time for credit unions to pay particular attention to proactive asset and liability management, arising from the changing maturity profile of their balance sheets, as credit unions seek to diversify their lending.

“This includes maintaining sufficient liquid assets to meet business requirements and withstand liquidity stress scenarios.”

The Central Bank found that the average percentage of total loans in arrears has continued to trend downwards post pandemic, but the total amount of loans in arrears, including early stage arrears, increased over 2023.

The sector recorded member savings increased from €17bn in 2022 to €17.5bn last year.

Average sector total realised reserves as a percentage of total assets have again increased marginally to 16.2pc. The required regulatory minimum reserve is 10pc of assets.