A GROUP of mortgage lenders has raised concerns that a recovery in Europe’s housing market will be put at risk by “hasty and excessive” proposals formulated in Brussels.

Suggestions for stricter criteria for property loans in the EU have been put forward in recent days as a possible addition to the bloc’s capital requirements directive, which sets ground rules for financial markets and is being revised after the financial crisis.

Residential property was “the asset class at the very heart of the current crisis”, according to the proposal drawn up by the European Commission. It is intended to remove national regulators’ discretion to set their own criteria for some lending standards.

However, the European Federation of Building Societies says that the proposal would interfere with the restoration of confidence in housing markets and could jeopardise mortgage lending in countries that escaped some of the excesses of the housing boom.

Mortgage credits would become much more expensive for consumers, it says. “Credit institutions would be forced to pass on the additional charges to consumers,” said Andreas Zehnder, its managing director. The proposals, if adopted, would mean banks would face greater restrictions on the amount they lend relative to a property’s value – the “loan-to- value” ratio - if they want part of the loan to attract preferential risk-weighting. – (Copyright The Financial Times Limited 2009)