Car and home improvement loans dominate credit union balance sheets
New Central Bank data shows car loans account for 28 per cent of sector’s loans
The study shows car loans account for 28 per cent of all credit union loans. Photograph: Alan Betson
Car and home improvement loans account for more than 50 per cent of the €4.5 billion in outstanding credit union loans in the Republic, new figures from the Central Bank shows.
The research, published by the Central Bank, informed the bank’s latest consultation paper on the sector, which advocates a loosening of the long-term lending restrictions imposed on the 264 credit unions operating here.
It showed car loans account for 28 per cent of all credit union loans, equating to €1.26 billion. This is the single biggest lending category followed by loans for home improvement, which account for 25.6 per cent of the total.
Home and commercial loans, the two main forms of long-term lending in the economy, account for only 4.5 per cent and 2.9 per cent of the cumulative loan book, however.
This is largely because of the restrictions imposed on credit unions, which limit how much money they can lend out on a long-term basis. Only 30 per cent of a credit union’s loan book can be lent out over five years while only 10 per cent can be lent out over 10 years.
Even without the proposed changes, the Central Bank predicts credit union mortgage lending will account for nearly 11 per cent of the sector’s loan book by 2022.
However, this may change significantly if the new rules are approved. The Central Bank is proposing to lift the existing lending maturity limits and replace them with “concentration limits” for house and commercial lending.