Credit Unions to launch new mortgage product, but...

Brendan Burgess

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at a variable interest rate of 4%!

Mortgage market shake-up: Credit unions set to challenge banks and open up market

The average interest rate on the mortgages will be a variable 4pc, which is considered high compared with some of the rates in the market.


Project manager for the league's mortgage Ciaran Mahon defended the rate, saying it compared favourably with the variables offered by Bank of Ireland and Permanent TSB.


"We are not expensive compared with Bank of Ireland and Permanent TSB," he said. "We are pricey compared with AIB's 3.2pc variable, that is true, but we are not setting out to be the cheapest."

Nine credit unions are already offering the new mortgage product, including those in Westport, Birr, Mullingar, Douglas and the St Paul's Garda, and the St Joseph's Irish Airports credit unions.


Five more lenders have signed up, and it is hoped 60 credit unions will offer the loans in the next year or two.
 

Brendan Burgess

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You would wonder if they are being serious?

Any Bank of Ireland customer paying 4.5% can switch to a one year fixed rate at 3%!


The AIB rates go down to 2.75%
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Brendan Burgess

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Sounds like they are going after the sub-prime market

https://www.independent.ie/business/personal-finance/property-mortgages/i-only-needed-a-100k-mortgage-for-a-480k-house-but-the-banks-turned-me-down-37370525.html

"I had been trying with the banks," he said. "I was never in the red. I had a lot of savings but it was no help whatsoever.


"I was told that being self-employed meant I did not meet the criteria."

His application was rejected [by the Credit Union] initially, but the lender worked with him and was prepared to accept the rental payments of €500 a month from his live-at-home daughter as part of his income assessment.
 

David1234

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What market are they going after with this move? What is their USP? I would of thought that Pepper offer a much better rate to people with blemishes on their credit ratings. If the Credit Unions have to adhere to the same lending criteria as the banks then why would anyone use them if their rates are this high?

So it has been 2 years in the making to offer a far inferior product than their competitors. Seems like this time could of been better spent elsewhere.
 

RedOnion

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What is their USP?
Quite simply, they're not a bank!.. Which will appeal to some people.

I never expected them to compete with the banks, but I expected a sub 4% rate.

But, with expectations of 160 mortgages by April this is drop in the ocean stuff. Not worthy of "market shake-up" headlines.
 

Brendan Burgess

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Most people do not remotely care what interest rate they are paying.

They like the credit union and some will move their mortgages from BoI at 4.5% to their local credit union at 4%, although they could simply ask BoI to reduce the rate to 3%.

Brendan
 

Buddyboy

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If my credit union started offering mortgages, I would withdraw my savings as soon as possible.

As it is being staffed by volunteers, I would have serious doubts as to their financial acumen, based on recent CU scandals (admittedly in other CUs).

It's all very well someone defaulting on a loan of 10,000 but when the stakes go up to the 100's of thousands per loan, I would get very worried.

Because, guess what, we may have another property crash :(
 

Brendan Burgess

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The boards of credit unions are all volunteers as far as I know.

The staff are usually all professionals - I mean "professional" in the sense that they are not volunteers.

Brendan
 

WizardDr

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For the avoidance of doubt 83 [EIGHTY THREE] Credit Unions claimed TRS equivalent for their members at end of year.

So they are not new to the game despite the hysterics, they are quiet about it.

The ILCU have been pushing this to a centralised model that is clearly not needed.
Systems and processes were developed by Wellington IT and they are as good as the Banks.
As regards the 'market' there are several areas that the Credit Unions can service and maybe the First Time Buyer is not one of them.
The Banks wont lend smaller amounts that we used to call 'equity release'.
That at 3-4% is better than unsecured at any other rate.
Some that have worked on Credit Union model may know more than you think.

What needs to be realised is that Credit Unions are like CBI and DoF - some absolutely brilliant people and some duds. Unfortunately unless one understands the likes of Health Services CU and the likes of St Canices CU in Kilkenny then one will remain in a state of lacking a vital element as to what they are about.

And remember this - just how many Banks were NOT rescued.

Tell me again out of 400 Credit Unions how many were 'rescued'?

Tell me again that the original rescue fund was to be €500m or €1bn with a hysterical reaction from DoF and CBI.

Tell me again that what was used was €35m - thirty five million. [ REBO figure may in fact be lower].
 
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Brendan Burgess

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Tell me again out of 400 Credit Unions how many were 'rescued'?
Hi Wizard. Almost all of them I would say.

They had deposits with the Irish banks and they would have lost those deposits if the Irish government had not guaranteed those deposits in full!

Furthermore, Brendan Logue in the Financial Regulator stopped the Credit Unions from reckless lending. It is a pity he was not in charge of the banks.

Brendan
 

Brendan Burgess

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The Banks wont lend smaller amounts that we used to call 'equity release'.
That at 3-4% is better than unsecured at any other rate.
This is a very good point.

The Credit Unions should not be used to fund the purchase of a house or to switch from an existing lender.

But they could issue smaller loans secured on a mortgage-free property.

4% for that would be fine. Much better than borrowing at their normal rates.

Brendan
 

Buddyboy

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What CU is still staffed by volunteers??
I should have been more specific. My credit union is a workplace credit union, which, to the best of my knowledge, is run by internal staff on a voluntary basis.
Sorry for the confusion.
It does of course have internal audit etc.
 

WizardDr

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Hold on Brendan.

1. Mortgage bonds were also paid out - so this 'bounty' applied to these sophisticated investors as well so that argument is nonsense.
2. Why can CUs not place excess liquidity with Department of Finance as a Government Bond? [Answer laziness by that Department - seen it on records]
3. All CU banking on line is free. Have a look at some of them to see how sophisticated it is.
4. Some of their cost structures reflect a panicked CBI imposing ridiculous structures.
5. The so called bailout of €500m - tell me how much was used.
6. Tell me again how much reckless lending cost the State [Answer: €35M]
7. CUs did more to help families when their trackers were 'taken from them' [Should that be a stronger word?]
 

Brendan Burgess

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1. Mortgage bonds were also paid out - so this 'bounty' applied to these sophisticated investors as well so that argument is nonsense.


The taxpayer guaranteed all the deposits put in Irish banks by Credit Unions. They should not have done so. The Credit Unions should have had to face these losses themselves. And their losses would have been substantial through the Credit Unions reckless deposit taking and deposit making behaviour.

So the taxpayer did bail out the Credit Unions which is what your first question was.

Yes, they also bailed out other depositors and bondholders. The taxpayer should not have done that either.

Brendan
 

WizardDr

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Park the Deposit issue for you should fight that battle with ECB. That applied to all depositors. It is a separate matter as well you know.


How much of the €500m (or €1bn listening to Michael Noonan) was paid to 'bail out' Credit Unions? [Just answer that]

Why did Department of Finance not allow CUs to place funds with them?

Given the restrictions on where CUs can place funds you might need to be more familiar with that too.
 

David1234

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Park the Deposit issue for you should fight that battle with ECB. That applied to all depositors. It is a separate matter as well you know.


How much of the €500m (or €1bn listening to Michael Noonan) was paid to 'bail out' Credit Unions? [Just answer that]

Why did Department of Finance not allow CUs to place funds with them?

Given the restrictions on where CUs can place funds you might need to be more familiar with that too.
You seem to be answering a lot of your own questions so it might speed things up if you just answer this one too?

The main point people are making about the CU offering mortgages is that at 4% for a standard mortgage the vast majority of people would be way overpaying unnecessarily.
 
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Brendan Burgess

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How much of the €500m (or €1bn listening to Michael Noonan) was paid to 'bail out' Credit Unions? [Just answer that]
Very little I am sure.

But the fact is whether you or the Credit Unions like it or not is that the credit unions were bailed out by the taxpayer.

Brendan
 

WizardDr

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So let us be clear:

The Lending side was rescued to the extent of €35m out of a €500m to €1bn 'required'.

It was the Banks deposits which were guaranteed despite the then existing limit on each account. I made the point that the lazy NTMA would not agree to CUs simply placing excess funds with NTMA. This was due to a misinformed Department accepting b/s from NTMA.

Credit Unions individually were not guaranteed over and above the then Deposit insurance.

Credit Unions despite not have their lending books shored up were forced to take panic driven provisions at the peak of the madness. Much of this is now written back.

So who then had shackles / restrictions / etc placed on them - Credit Unions. This contrasts with how Banks were dealt with. [Loss: €64bn]

This was based on what we call 'data driven' models. Blinded by the 'science' CBI then went into overdrive believing that the Sector was absolutely heading for the biggest crash of all and beat the living dayights out of the CUs, worse than any Christian Brother.

The reality is that if you want to see how 'data' can blind other factors - start asking CBI how they got convinced that the CUs were collectively heading for huge losses and er .. it did not materialise.

Then we had the alleged situation of mortgage holders paying their Credit Union ahead of the mortgage resulting in additional regulations for which there was scant evidence.
 
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