Brussels, 19/07/2005 (Agence Europe) - Presenting the Commission's Green Paper on mortgage credit on Tuesday, Charlie McCreevy said greater activity and cross-border competition on the mortgage market in the EU could expand choice and reduce costs. Many citizens prefer to deal with local or national financial establishments for linguistic reasons and reasons relating to their knowledge of local or national tax and legal systems, the European Commissioner for the internal market acknowledged. The Green Paper triggers public consultation open until 30 November 2005 in order to determine whether a European initiative is desirable in this field and recommended by the players in this field. It studies the devolution of national mortgage credit markets and identifies obstacles to their European integration. It is the second stage in a four-stage exercise after the publication, in December 2004, of 48 recommendations by a group of experts in real-estate loans (see EUROPE 8847). The Commission will publish a study in August on the costs and benefits of integrating the EU market in this retail financial services segment and will organise a public hearing in December. Its decision to launch an initiative will not be made until early 2006.
The Green Paper launches reflection on the obstacles to national mortgage credit markets integrating the EU market. In order to enhance consumer confidence toward cross-border financial products, it mainly looks at how to effectively compare loan offers in other Member States and at the rules for calculating interest to be paid when a loan is taken out. It looks at the possibility that consumers may wish to change their lending bank during the loan period, a question that is closely linked to that of early reimbursement. Belgian and French legislation authorise borrowers to pay back a mortgage loan before expiry of the time originally set for the loan, subject to a penalty payment of several months, said Eric Ducoulombier, Deputy Head of Unit on operations with individuals and on payment systems at the Commission. In Germany, on the other hand, and in the United Kingdom also to some extent, this right of principle does not exist, he added. He acknowledged the fact that other obstacles affect areas bordering on the internal market. Cross-border recovery of mortgages would come more under justice and home affairs policy, whereas the differences in tax treatment between residents of a Member State and citizens whose tax base is in another Member State comes under the tax administration.
The Green Paper covers related elements such as solicitors' acts and the constitution of a guarantee that allow a mortgage credit to be established. In Italy, it is not possible to publish the fees of solicitors. When asked about this, Charlie McCreevy said he hoped the Italian consumer organisations would highlight this aspect of things. He added, however, that, in Ireland, far from bringing prices down, the liberalisation of certain advertising rules has the contrary effect.
On the distribution side, the Green Paper asks whether an European initiative would have the effect of inciting economic operators to exercise their activities more on a cross-border basis. It evokes the possibility of facilitating the access by borrowers in one Member State to the national databases on loans and/or cadastral maps where these exist in another. Would a European initiative allow competition between mortgage credit providers to increase and make new products and new financial players other than banks to emerge? Charlie McCreevy is convinced there will be no new products. The Commission calls on players to fuel discussion on the concept of “Eurocredit” which appeared in the sixties, and which is the subject of academic studies such as that published in May 2005 by the Mortgage Credit Foundation in Warsaw. The Commission also asks about the development of new distribution channels to improve the cross-border supply, such as greater use of the Internet which “seems to be beginning” in the United Kingdom, according to Eric Ducoulombier.
Currently there is no European legislation specific to mortgage credit. There is only a Commission recommendation in favour of voluntary adoption of a code of conduct on pre-contractual information relating to housing loans. “We were fully in favour of the code of conduct and we shall be re-examining the matter”, Charle McCreevy said.
One percent of European citizens, mainly buyers of secondary residences or dwellings in cross-border zones, have taken out a mortgage loan with a financial establishment established in another Member State. In 2003, the volume of loans still in progress is equivalent to EUR 4,000 billion, that is, around 40% of the Gross Domestic Product of the EU. The 2004 volume should be equivalent to that of 2003, Eric Ducoulombier pointed out.