Credit unions eye mortgage market

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Last updated 05:00 15/12/2013

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Credit unions could soon be bigger players in the mortgage market.

Henry Lynch, chief executive of the Association of Credit Unions, said terms had been agreed with a major financier for a $100 million mortgage funding line for all its members.

The credit unions provide financial services for 210,000 New Zealanders through over 95 branches and are customer-owned mutual organisations.

While providing deposit, personal loans and transactional facilities such as eftpos cards, they are bit players in the mortgage market thanks to legal restrictions, limiting their appeal to many who might otherwise join.

The credit unions are battling for a more level playing field by campaigning to change the way the Reserve Bank regulates them.

In the meantime, they're pushing ahead with growth plans including the mortgage funding facility which the credit unions hope will win new customers as well as increase their share of current customers' business.

"Thirty per cent of our members have a mortgage somewhere else," Lynch said. Though the credit unions were not covered by the Reserve Bank loan to value restrictions, it was not an area in which the credit unions plan to compete, he said.

The $100m facility would be a significant step for the credit unions, many of which are small, and would give them an off balance sheet way of expanding into the mortgage market. The combined assets of the association's 18-member credit unions is $1.3 billion. The credit unions are also planning to launch a mobile banking app next year.

Lynch thinks red tape governing credit unions could be eased by removing the requirement for them to have credit ratings and changing the regulatory regime so that they are supervised directly by the Reserve Bank.

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- Sunday Star Times

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