DUBLIN, Ireland–This country’s mortgage market is getting what one analysis called “a massive shake-up” as credit unions launch a more sophisticated and centralized mortgage solution.
The new mortgage challenge to banks has been two years in the making, according to The Independent.
Ireland’s credit unions have successfully completed a pilot study of their new home loan, and hundreds of people could be borrowing from CUs by this time next year, the Independent said.
The new CUhome mortgage has been standardized with the tacit approval from the Central Bank, according to the publication, and some 160 are expected to be issued by next April, with the number doubling each year.
Around 100 credit unions already offer some mortgages on an ad hoc basis, but a recent probe by the Central Bank found a litany of failings in how they offer them, according to the Independent.
Centralized Unit Created
“In response, the Irish League of Credit Unions set up a new centralized unit to provide a high standard product with the aim of overcoming the shortcomings,” the Independent said. “Global financial services firm Link ASI has been engaged to provide underwriting, legal services, software and credit assessments to bolster the mortgage offering from the local lenders.”
Final decisions on home-loan applications will be made by the individual credit union, but any mortgages in arrears will be handled by Link ASI, and the league members have signed up to the Central Bank's Code of Conduct on Mortgage Arrears, the Independent said.
The average interest rate on the mortgages will be a variable 4%, with one league spokesperson saying, “We are not setting out to be the cheapest."
‘Huge Pent-Up Demand’
“Credit unions are reporting huge pent-up demand for mortgages,” the Independent said. “Current rules mean credit unions can only issue 10% of their individual loan books in long-term lending, such as mortgages.”
The league said that even with the lending limit, credit unions in Ireland have approximately €270 million to lend, which could translate into approximately 2,700 smaller mortgages.
Nine credit unions are already offering the new mortgage product, and five more have signed on.