Credit Union Mortgages

M

mitzymoo

Registered User
Messages
17
Has anyone any experience of taking out a mortgage with a credit union?
Mine is offering rates of 3.75% which is competitive in the current market but I just want to see if there is any hidden pit falls I haven't considered?

From my understanding is that the rate charged is not subject to ECB rate increases so although it is variable this should not increase (note I am waiting on further information from my credit union about the wording of this).
 
mitzymoo said:
From my understanding is that the rate charged is not subject to ECB rate increases so although it is variable this should not increase (note I am waiting on further information from my credit union about the wording of this).
Click to expand...
I very much doubt that.
Otherwise it's actually a fixed rate of 3.75% for the duration of the loan.
Maybe you mean that it's not a tracker so the rate will not track the ECB rate (base rate + margin) but will fluctuate, most likely more or less in line with ECB rate changes?
 
Every credit union sets their own interest rates, so there is no blanket answer. A small number offer 3 to 5 year fixed rates, but otherwise they are variable. If variable, similar to a bank all the CU will tell you is the impact of a 1% increase in rates on your repayments, and provide you with their standard variable rate policy statement.
 
They obviously can't and don't advertise this but their variable products are de facto fixed. They change their rates for new business all the time but I've never come across a credit union - other than one that is on the brink of failure - increase the rate on the current loan book. The ECB rate increases have limited impact on them as they are fully funded from their extremely sticky member deposits, which is effectively a free source of funding. There's obviously a point whereby they will be able to generate a better return from investments in a higher interest rate environment than they would from issuing mortgages, but they are restricted to 10 year investments.
 
24601 said:
They obviously can't and don't advertise this but their variable products are de facto fixed. They change their rates for new business all the time but I've never come across a credit union - other than one that is on the brink of failure - increase the rate on the current loan book.
Click to expand...
Wow. Is that really true?
Imagine the uproar if one of the bank lenders treated variable rate customers like that depending on when they drew down their loan loans?!
 
ClubMan said:
Wow. Is that really true?
Imagine the uproar if one of the bank lenders treated variable rate customers like that depending on when they drew down their loan loans?!
Click to expand...
I don’t follow? They’re allowing variable rate customers enjoy the benefits of fixed rate certainty? So when you take out a variable rate loan with them you don’t need to worry that they will increase your rate if ECB rates start climbing.
 
24601 said:
They obviously can't and don't advertise this but their variable products are de facto fixed.
Click to expand...
They can't say it, because its not correct. I wouldn't assume a rate is fixed for the next 30 years based on what's happened during a flat interest rate period in short term loan products.

Credit Unions haven't been doing mortgages for long, and there's already been a rate change (downwards!) by St Raphaels last spring.

Some credit unions offering mortgages have a contractual cap on the variable rate ( I think St Francis is an example). But by and large, the credit unions have the technical capability and contractual right to change the rate.
 
Thanks all for your replies.

I have spoken in more detail to my CU. Although it is technically a variable rate, the mortgages are funded by shareholder savings. Any change to the rate needs to be approved via a full business case to the Board. This has never happened to date.
My own CU has had only a small amount of mortgages on its books as they have only introduced the facility in the past couple of years but have increased the loan amounts & terms offered recently. They hope that as their loan book grows that they may actually be able to reduce their rates in the future.
They are not linked to ECB rates so any announcements will not impact the rates offered.
For myself I am seriously considering it as crunching the numbers is making them very attractive at the moment.
 
My local Credit Union offers 4% variable which doesn't seem to bad compared to the banks. They have also never increased this rate, although they are only offering mortgages with a couple of years.

From what I gather, Credit Union mortgages were usually more expensive than some of the more traditional main stream lenders, but that isn't the case now with the rise in rates? They seems like a viable option to me. I'm just trying to figure out if there are any downsides to going with the Credit Union.
 
Brendan Burgess said:
4% is just ok. https://www.askaboutmoney.com/threads/list-of-credit-union-mortgage-rates.231716/
Click to expand...
Yes, I came across that post and many Credit Unions offer a more attractive rate. Unfortunately due to my location I can only apply to a single Credit Union.

4% is around most banks variable rate is these days. The rationale behind my thinking is that the CU are unlikely to hike rates short term, where as the banks are more likely to do so. Because of this, the CU are an attractive alternative, especially with the option to switch if/when rates do come down. Of course, things might not play out this way at all, but I have to make a decision and based on what I've researched over the past few days this is where I've landed.
 
I got a 2.9% 10 year fixed switcher mortgage from CANA CU a few years ago. They only do switchers, not new lending.

I also no longer needed to pay monthly mortgage protection as they covered it with their general loan protection
 
You must log in or register to reply here.
Back
Top