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The overheated real estate market was what sparked the economic crisis in many countries. Blinded by the availability of cheap credit, many borrowers took out mortgages they could not possibly repay. That is why MEPs are pushing the finance industry to provide borrowers with high-quality advice about the risks involved in loans, which would make mortgage lending sounder and more transparent.
Importance of the EU mortgage market
The EU mortgage market is of crucial importance to the economy. In 2009, residential mortgage lending in the EU amounted to just over €6 trillion, which is equivalent to 52 per cent of the EU's gross domestic product. Home ownership in the EU is close to 70 per cent.
The EP's economic and monetary affairs committee will on Thursday 7 June vote on a report on how to improve residential mortgage lending, prepared by the Spanish Social-Democrat, Antolín Sánchez Presedo.
Why changes are needed
In a previous interview, Mr Sánchez Presedo pointed to the key role the mortgage market played in the current crisis: "Over-indebtedness is still at the centre of the crisis. Regulating mortgage markets would be an important first step to fight this." In his report he focuses on ways to make the mortgage market more robust. "I want to identify risky products and to give power to supervisory authorities to impose extra measures including consumer warnings and stricter prudential requirements so that those taking greater risks also bear the potential costs of those risks."
What is being proposed
The report contains a number of recommendations to improve the situation for existing and prospective home owners: