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



## Brendan Burgess (9 Aug 2016)

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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## Brendan Burgess (9 Aug 2016)

The weird thing here is that the Credit Unions are actually blaming the Central Bank for not allowing such lending! 

*The potential regulatory and legislative implications of credit union involvement in the social hous*ing 

This has nothing to do with the Central Bank. Even if they were to approve such lending, the government would be crazy to take it up. 

It's a pity that the government doesn't have the bottle to tell the Credit Unions the facts of life. 

Brendan


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## Brendan Burgess (9 Aug 2016)

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


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## 24601 (10 Aug 2016)

Brendan Burgess said:


> 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.
> 
> ...


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?


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## Brendan Burgess (10 Aug 2016)

24601 said:


> Would I be right in thinking the 'off-balance sheet' argument is totally irrelevant now



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.


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## Gerry Canning (10 Aug 2016)

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.


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## 24601 (10 Aug 2016)

Gerry Canning said:


> Can see merit in it.
> 
> 1. CU,s have funds making nought.
> 2. The State (us) guarantee the CU,s 3%.
> ...


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.


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## Gerry Canning (10 Aug 2016)

24601.

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


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