The Credit Unions want to charge the government rates of 3% to 4% to fund social housing!

Discussion in 'Credit Union issues' started by Brendan Burgess, Aug 9, 2016.

  1. Brendan Burgess

    Brendan Burgess Founder

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    I was at a CU Summer School in UCC a couple of weeks ago and this issue of the Credit Unions funding social housing came up a few times. It didn't make any sense to me at the time, but I knew nothing about it. I have spoken to a few people since and the League's proposal is just bonkers.

    The propose to charge between 3% and 4% to the government for this secured funding. See here.

    The Irish government can borrow 10 year money at 0.4%. Why on earth would they borrow from the Credit Unions at 10 times the rates they can pay on the international markets?

    The League is absolutely extraordinary. They want the Irish taxpayer to subsidise the Credit Union movement.

    One of the benefits claimed by the League is that it would not appear in the government accounts. There are three guys in Mountjoy tonight for trying to make the accounts of Anglo Irish look a bit better. At least they did not pretend that they owed less than they did.

    Brendan
     
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  2. Brendan Burgess

    Brendan Burgess Founder

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  3. Brendan Burgess

    Brendan Burgess Founder

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    The Housing Finance Agency provides loans to its customers at 1.73% in 2015

    "Our results were achieved while delivering an average interest rate of 1.73% (2014:1.85%) to our customers, which is very competitive when compared with alternative sources available in the market."

    They paid 1.35% for their funds. (€47m interest on €3.5 billion of borrowing). I would guess that this is high because of older bonds on fixed rates. I presume that they can borrow new money at the same rate as the government.

    Brendan
     
  4. 24601

    24601 Registered User

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    Are there any reasons that this would actually benefit the State? Would I be right in thinking the 'off-balance sheet' argument is totally irrelevant now given the recent GDP figures and the consequential fiscal space?
     
  5. Brendan Burgess

    Brendan Burgess Founder

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    Hi 24601,

    I always thought it irrelevant anyway, especially with Irish Water. The taxpayer was responsible for the borrowing. I didn't care what Eurostat said. But the GDP figures make it even more irrelevant.

    I am opposed to window dressing in any form, whether it's the state debt or the balance sheet of Anglo Irish Bank.
     
  6. Gerry Canning

    Gerry Canning Frequent Poster

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    Can see merit in it.

    1. CU,s have funds making nought.
    2. The State (us) guarantee the CU,s 3%.
    3. Customers get mortgages at reasonable rates.
    4. Could be managed to ensure customers pay their mortgages.
    5. Could be engineered to be a quasi social housing BUT ensuring people pay their rent/mortgage.

    Why not use (our) Cu funds ?

    Just wondering.
     
  7. 24601

    24601 Registered User

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    That misunderstands the proposal. The ILCU are offering the State funding from their member credit unions to build social housing, not mortgages to customers. Why should the State "guarantee" credit unions 3%-4% when they can get the funds elsewhere for around 10% of that? It would be taxpayers subsidizing credit unions by paying far more to fix the housing crisis than needs be - that's surely not good public policy? Great 'merit' in it for credit unions though.
     
  8. Gerry Canning

    Gerry Canning Frequent Poster

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    24601.

    yup I misunderstood.
    Seems a pity though to have X Billions in Cu,s doing nought?