In theory, EU integration could result in more choice for consumers as lenders from a variety of countries vie for business from domestic and overseas borrowers. In reality, there are many hurdles to overcome before this becomes anything like reality.There isn’t yet agreement on what European mortgage integration is, let alone how it would work. For example, does it mean the same range of products should be available in all states at the same price or is it that lenders should be willing to loan funds in all states on the same terms? There is wide variation in legal practices and home buying regulations across the EU, which could be a minefield for borrowers. Any sort of legal harmonisation across member states would be hard to achieve and probably result in a long and complex process at a high cost. What is more likely is that there will be commonly accepted standards and rules so there would at least be a more consistent approach to lending and conveyancing. Santander and Abbey are leading the way with European integration, which has the benefit of meeting cross-border needs and facilitates the transfer of knowledge from country to country. A pan-European capability results in faster innovation, the ability to replicate products across markets and enhanced customer service. For example, Abbey recently launched a range of euro mortgages for UK borrowers buying properties in Spain. The mortgages are underwritten in the UK and processed in Spain, taking advantage of cost synergies across Abbey and Banco Santander. While the barriers to market entry are not likely to come down overnight, market integration will be led by pan-European banks with integrated operations. This should mean more competition and bring savings to consumers in Europe. At the risk of sounding like a politician, the answer here depends on what the question means. If it means making it easier to do business in different member states the answer is yes. If it means standardising consumer protection in a vain attempt to encourage unpopular cross-border shopping, no. The problem is that the European Commission is seeking the Holy Grail of integration without knowing what it looks like. Because the Commission has so far failed to define integration it cannot quantify its effects. There are many differences between EU markets. The most important ones to tackle – to enable lenders to operate in different member states – are the huge variations in access to credit data about borrowers, land registration systems and mechanisms to take possession of property. But these are not areas in which the Commission is showing much interest. Given that the Commission is supposedly in listening mode it is bad news that it has brought forward its anticipated publication date for firmer proposals, from October 2006 to spring next year. This decision rather implies that the Commission has already made up its mind about how to proceed despite the current consultations. The cost-benefit analysis undertaken for the Commission by London Economics indicated that this country would be the only net loser among EU member states from the raft of mooted integration measures. This is cruelly ironic given that the aim of the exercise is essentially to get the other European mortgage markets to look more like that in the UK. In short, the Commission should reflect. It ignores the views of Europe’s most efficient market at its peril.
In theory customers should benefit from the integration of European mortgage markets but the reality is likely to be different, say our experts