The EFBS study focuses on the question why visible differences have continued to exist between the EU residential property financing markets and whether the EU Commission would be able to improve the functioning of the markets by way of regulation.
The way toward cross-border competition in the field of mortgage credit is not harmonisation, but an alternative to national regulations. This is the conclusion reached by the Study “An internal European market for housing finance“ prepared at the request of the Federation of German Pfandbrief Banks, the German Federation of Private Bausparkassen and the Bundesgeschäftsstelle Landesbausparkassen by the Institut der Deutschen Wirtschaft (Cologne) in cooperation with the Centre for European Economic Research (Mannheim) and Prof. Dr. Johannes Köndgen (Bonn University). The study was presented by the Federations in a meeting at the premises of the European Parliament in Brussels on 26 April 2010, which MEP Wolf Klinz (ALDE) opened with the words: “The current financial crisis has revealed the strengths and weaknesses of certain housing finance systems. The task confronting Europe now is to learn from this crisis and to make sure that there will never again be a repetition.”
The study has examined the economic and legal frameworks of seven Member States and shown substantial differences. For example, in France and Germany consumers prefer long-term fixed-interest loans, while borrowers in the UK seem to rely more strongly on variable-interest credit agreements. Because of the possibility of borrowers in the Netherlands to deduct debt interest from their tax bills, they prefer to take up loans with high loan-to-value ratios; in Germany the owner's equity share is much higher.
A Green Paper and a White Paper published by the EU Commission have intensified the debate on integration of European markets for home loans in recent years.
The approach to this theme has been subject to occasional change over time. For instance, whilst the focus had still been on market completion in the middle of the present decade, the focus has been on harmonized consumer protection ever since the outbreak of the international financial market crisis. However, since creating appropriate consumer protection standards does not require market integration, this Study focuses on the question why visible differences have continued to exist between the EU residential property financing markets and whether the EU Commission would be able to improve the functioning of the markets by way of regulation. In essence, the question therefore is whether and, if so, how the framework conditions pertaining to cross-border financing arrangements can be improved.
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