EU moves on mortgages

An EU consultation paper examining the case for cross-border mortgages has been welcomed by the banking industry here. The European Commission wants to make it easier for house buyers in the EU to shop for mortgage credit in other member states.

Less than 1 per cent of loans granted by the EU's €4,200 billion mortgage industry are made between a borrower and lender in a different EU member state.

The commission, which has long been keen to stimulate cross-border competition in financial services in the EU, yesterday launched a green paper suggesting ways of breaking down national barriers.

Welcoming the publication, the Irish Bankers' Federation (IBF) said it was confident that the Irish mortgage sector would fare well in any pan-European environment.

It added that consumers' willingness to deal with a foreign lender would be determined not only by the competitiveness of the loans but by the extent to which the lenders were bound by common and familiar consumer protection rules.

"At the same time, mortgage lenders will only offer mortgages across borders where they can offer something new, different or more competitively priced than the products already offered in that market," the banking industry body said in a statement.

The IBF said it would make a submission to the consultation paper by the November deadline.

Charlie McCreevy, the EU's internal market and services commissioner, said the mortgage credit markets were a very significant part of the EU economy.

"More cross-border activity and competition in the EU mortgage market could increase choice, reduce costs and leave more money in people's pockets at the end of the month," he said.

However, he said the commission had not made up its mind whether to propose formal legislation on mortgage credit but would await further analysis as well as the outcome of consultations with mortgage lenders, regulators and other parties.

EU legislation on this issue would not be proposed before next year, Mr McCreevy said.

The commission and the mortgage credit industry acknowledged yesterday that the obstacles standing in the way of greater cross-border lending activity were numerous and deeply rooted.These include different approaches to property valuation, early repayment of loans, taxation and lenders' access to databases and land registers.

Arianna Mellini Sforza, a mortgage expert at the European Banking Federation, said it was often difficult for lenders to obtain a property in another state when the borrower defaulted.