Press Release
CML urges shift of emphasis in European mortgage proposals
20 July 2005
The Council of Mortgage Lenders is disappointed by the European Commission's Green Paper Mortgage Credit in the EU. The CML believes that the emphasis in the paper on retail standardisation to promote cross-border borrowing is too strong, and the consideration of integrating capital funding markets is too weak.
The CML thinks that the Commission is right to delay taking a full position on market reform until full consultation has taken place and the results of a cost/benefit study on further integration are available. However, the CML is disappointed that the Green Paper fails to define what the Commission means by an integrated mortgage market. The CML believes that encouraging lenders to operate in other European markets will be more successful than focusing on consumer measures.
From a UK perspective, the heavy focus on issues such as the standardisation and regulation of mortgage information and advice could actually cause huge disruption and higher costs for UK consumers and lenders alike. In any case, the CML believes that seeing an integrated market as one where consumers shop for mortgage products from lenders operating from other countries misses the point. Even the Commission concedes that such activity is insignificant, accounting for less than 1% of the European mortgage market. In the view of UK lenders this is unlikely to change quickly. Far more important is the potential for firms to set up operations in other member states via mergers, joint ventures or subsidiaries. Many lenders also believe that the potential to integrate capital funding markets is greater in the short term, yet the Green Paper gives less emphasis to these aspects.
The Commission expects integration to provide benefits such as lower cost mortgages, improved products and innovation, high levels of consumer protection, improved access to mortgages for sub-prime borrowers, better economies of scale, and more efficient use of the capital markets for funding. But the UK market, which is highly competitive, already offers these benefits. The risk is therefore that European-led changes to the FSA mortgage regime could simply increase costs without providing corresponding benefits.
Commenting on the paper, CML Director General Michael Coogan said:
"The discussion on removing barriers is clearly worthwhile. But there is little obvious benefit for UK lenders or consumers from these proposals. The UK already has a highly competitive and well-regulated mortgage market. A costly overhaul of the UK regulations to conform to a European standard process may well benefit other member states, but not the UK. We will be working to encourage the Commission to give greater focus to the idea of finding common ground on mortgage funding efficiencies. In the short term, we think the Commission is barking up the wrong tree by concentrating on encouraging cross-border mortgage shopping, for which consumers show very little appetite."
Latest Press Releases
- Gross lending edges down in May
- Resurgence of fixed-rate loans in April
- CML introduces new process for conveyancing and valuing newly-built properties
- Housing affordability and supply challenges Northern Ireland borrowers
- CML responds to rate hold decision
- Lenders outline steps to address credit crunch problems
- Richard Brown becomes acting CML chairman
- Borrowers in Scotland fare better in credit crunch than UK counterparts
- CML publishes April gross lending figure and 2008 forecast
- CML responds to government's draft legislative agenda
Spread your message to an audience that counts, with options available for our website, email bulletins and publications including The House Magazine.
