EU-mortgage plan frozen until 2007

By Anna McLauchlin

Date: 09/03/06

The European Commission's plans to integrate the EU's mortgage markets have been delayed until 2007 as officials have decided to deepen their research into the issues at stake. A White Paper was at first planned in September but will not now emerge until next year.

Late last month the EU executive established a 20-strong group of industry experts to look into creating a pan-EU market for banks to fund mortgages. On 2 March this was followed by an announcement that a second group would tackle consumer issues thrown up by a wider European market.

Participants in the funding group will meet for the first time on 5 April and then every month until November when they will publish their conclusions for the Commission to take account of in its White Paper, now planned for some time in 2007.

Banks raise money to fund mortgages either by using their account-holders' money or by issuing bonds. But the potential fund pool is still limited for banks because the market remains fractured along national lines. At the same time, an international investor wanting to put money into European markets has to consider the different regulations in force in each member state.

A pan-EU funding system would increase market liquidity and ultimately lead to cheaper mortgages for consumers, but there is no unanimity about how to achieve it.

A forum group set up by the Commission in 2003, on which its Green Paper of last July was largely based, did not manage to reach a firm conclusion on funding.

One answer might be to develop European standards for bonds or mortgage-backed securities and these are options to be considered by the group.

The Commission is also looking at how to make it easier for people to move their mortgage loan between banks using a so-called Euromortgage, an idea which has floated around for several decades but has never been realised.

De-linking the mortgage loan from property would enable mortgage holders to switch between banks and allow banks to move entire loan portfolios, with potential for big savings.

But member states are divided on the issue, which would imply broad legal changes at national level.

The UK already has a very flexible system and Germany is pushing hard for the Euromortgage, but other member states with a more limited legal framework, including France and Spain, are hesitant.

Experts will also work on how properties are valued, to make it easier for pan-EU lenders to compare prices. There are plans to open up national registers of landowners as well as credit registers so that non-domestic lenders are more informed about who owns what in the country they are lending to and whether their customers are likely to be able to repay their loan.

One industry representative welcomed the discussions but said that he was unsure about the need for a consumer group. The Commission's Green Paper has already studied the consumer aspects of the market in detail.

"We get the feeling that this group will just rake up old issues that were already ironed out by the forum group," he said.

Article reports that the European Commission decided in February 2006 to delay its plans to integrate the EU's mortgage markets until 2007 as officials wanted to deepen their research into the issues at stake. A White Paper was at first planned to be adopted in September 2006 but would not now emerge until 2007.

European Commission: DG Internal Market and Services: Free movement of services: Financial Services: Retail financial services: Home Loans http://ec.europa.eu/comm/internal_market/finservices-retail/home-loans/index_en.htm

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