Brussels, 18/08/2005 (Agence Europe) - As we announced in EUROPE 9006, the Commission published, at the beginning of August, an external study by London Economics consultancy on costs and benefits of European integration in the mortgage loans market. Between 2005-15, benefits will be to the tune of EUR 94.6 bn while costs are expected to approach an annual amount of EUR 2.5 bn. The study illustrates the current situation and mortgage loan market trends and identifies obstacles to their European integration, as well as assessing the position for borrowers and lenders in a pan-European market. The study, however, does not shed any light on what measures to take or on what scale (national or European) or how measures should be applied but it does mention the contents of possible initiatives.
With European integration of the national mortgages markets, Gross Domestic Product (GDP) in the EU and individual consumer rates will increase by 0.7% (EUR 85.8 bn) and 0.5% (EUR 38.7 bn) respectively between 2005-15. More choice of loans will have a beneficial impact. Interest rates will decrease by 47 basic points - an annual gain for the borrower of EUR 470 for a loan worth EUR 100,000.
The study indicates that “without new major legislative initiatives”, European integration in the mortgages and loans domain will be in real terms but will also be “slow and variable”. It lists the kind of measures that could be taken, such as: the lifting of certain restrictions in consumer law; the abolition of different treatment for tax dealings between domestic and foreign credit institutions; equal access to national data bases on mortgages and loans; the setting up of European standards in property assessments; the improvements of national real estate registries.
The study points out that with regard to obstacles to European integration of the national mortgage markets, major problems were identified when comparing prices, the lack of familiarity and experience of borrowers and lenders with the national legislation of other Member States, the attitude of national authorities that can frustrate the attempts by foreign establishments to acquire domestic banks, as well as the differences between national legislation on credit.
The study revealed that “basic interest rates have experienced significant convergence across the EU over recent years”. The level of debt (mortgage debt outstanding), measured in a percentage of GDP varies widely between Member States. In 2003 it represented 70% in the United Kingdom and 13% in Italy. The number of mortgage or loan products also varied sharply across Member States. It is highest in the United Kingdom and the Netherlands. When they attempt to develop their activities abroad, credit institutions prefer to acquire their branches which are already set up in the countries concerned rather than grant loans on a cross border basis where they do not actually have a presence.
At the end of July, Charlie McCreevy, Commissioner for the internal market submitted a Green Paper on mortgage loans. This will be seeking consultation with sector actors up to 30 November on opportunities contained in this European initiative (EUROPE 8994). The Commission will be organising a public hearing in December on the subject. The study is available on Directorate General Internal Market web-site: (http: //europa.eu.int/comm/internal_market/finservices-retail/home-loans/index_en.htm).