The average mortgage borrower from a credit union has a lower income than those getting a home loan from a bank, according to data compiled by representative body the Credit Union Development Association (CUDA).
People taking out a mortgage have a higher income relative to the loan and more equity in their home, information provided by CUDA chief executive Kevin Johnson shows.
Under Central Bank regulations, credit unions are heavily restricted from expanding their mortgage lending.
The member-owned lenders already offer the cheapest mortgage rates in the market, but many end up having to turn away customers because they quickly exhaust what they are allowed to lend to members.
The sector’s mortgage book has increased by 62pc over the last year, but the regulatory restrictions are hindering further expansion.
Mr Johnson said credit union lending was not risky.
“What appears to be a recent surge in credit union mortgage lending is actually a well-thought-out risk-managed approach to growing skills and competency in this market,” he said.
He added that credit unions began offering mortgages under the tenant purchase scheme in 2017, but now service the full mortgage market, including first-time buyers, movers and switchers.
Last year, just under 50pc of credit union lending was to first-time buyers, with movers and switchers representing just under 25pc each.
This is reflected in the average credit union mortgage now being almost double what it was seven years ago.
However, the average household income for a credit union mortgage last year was €74,000. This compares with an average of €102,000 for a bank mortgage.
The average interest rate on credit union mortgages last year was 3.7pc
“This means the average household income for a credit union mortgage is almost 40pc lower than it is for the banks,” Mr Johnson said.
“These previously underserved people, while not deemed profitable enough for some lenders, are actually lower risk.”
He said the data showed credit unions are issuing mortgages to a cohort of society with much lower incomes – a group of people that either struggles or chooses not to deal with the banks.
Such borrowers are often in lower paid, but more secure employment; take out a smaller mortgage; and have less exposure to additional short-term debts.
“It is a key part of why credit unions should be permitted to continue to evolve this part of their business,” Mr Johnson said.
Data from CUDA’s Sam (System for Application Management) platform shows the average interest rate on credit union mortgages last year was 3.7pc.
This compares with an average of 3.9pc for first-time borrowers from banks.
The average credit union mortgage last year was €195,000, which is far less than the average from the banks.
“From the perspective of the amounts being borrowed, credit union mortgages have a lower risk profile than the banks,” Mr Johnson said.
