Home loans: Commission publishes expert report on boosting the cross-border mortgage market
European Commission - IP/04/1466 13/12/2004
Brussels, 13 December 2004
The report of the Forum Group on Mortgage Credit, set up by the European Commission in March 2003 (see IP/03/442), is published today. It proposes legislative and non-legislative measures to boost the integration of the EU home loans market, which could lead to more choice and financial savings for consumers and new opportunities for lenders. The steps advocated by the Forum Group, which comprised industry and consumer representatives, cover many areas including consumer protection, client credit assessment, mortgage brokers, registration systems, which law should apply in cross-border contracts, and the financing of mortgages through capital markets. The Commission will present a Communication by the middle of 2005 with its own views on how the Group’s 48 recommendations could be developed into EU policy.
Single Market Commissioner Charlie McCreevy said: “This valuable work by the Forum Group shows that industry and consumer groups can work together. We will act on the fruits of their labour. A mortgage is the biggest purchase most consumers make. So we must not shrink from the challenge of creating a true single market for home loans. An efficient single market could mean cheaper and better loans for all Europeans, whether or not they obtain their mortgage abroad.”
At the end of 2002, outstanding residential mortgage loans in the then fifteen Member States stood at € 4 trillion, 40% of GDP. Yet a recent Eurobarometer study showed that only 1% of Europeans, mostly second home owners or those in border regions, take out a mortgage from another Member State. Reasons include the difficulty of comparing complex products and language and legal barriers, including differences in national provisions on consumer protection, such as early repayment rules.
The Forum Group was unanimous that consumer confidence is a prerequisite for an integrated mortgage market. It concludes that EU legislation should bring into line national rules on early repayment fees and on calculation of real interest rates.
The Group considers that confusion about which national law applies to mortgage credit and mortgage deed contracts when more than one Member State is involved could discourage both lenders and consumers from cross-border mortgage transactions.
The report also asks the Commission to encourage information sharing between Member States in areas such as credit databases and land registration systems.
It looks at the potential for newer distribution channels such as the Internet to encourage the development of a single market and makes suggestions on existing distribution channels, including a recommendation for a unified supervisory system for mortgage brokers based on registration with an authority in their home Member State.
Finally the Forum Group considered the financing of mortgage lending, calling for a deeper and more liquid secondary market for mortgage funding. It recommends equal access to securitisation for lenders in different jurisdictions, with protection of that securitisation if a lender goes bankrupt, and rules allowing cross-border pooling of mortgage collateral.
In parallel with the Forum Group exercise, the Commission has launched research on the economic costs and benefits of further integration of the mortgage market.
The full report is at: