Following the recent elections, the European Union is in the headlines again. And with 12 of the 15 EU countries adopting the euro, I could not resist the opportunity to look at whether the property and mortgage markets are showing any signs of integration.
I start with owner-occupation rates, which have been climbing in recent years. Levels of home-ownership are essential to the health of mortgage markets and EU home-ownership has grown between 1990 and 2002 in nine of the 15 countries, though rates differ markedly across Europe.
On 2002 figures, the highest rate of home-ownership is found in Greece at 83% and the lowest in Germany at 41%. Ireland stands at 80% and the UK comes in at 70%.
What is interesting is that there are clear signs of a convergence in European mortgage interest rates, which have fallen significantly. In 1996 the highest rate was 17% and the lowest was 7%, but by the middle of 2003 the highest was 6.5% and the lowest, 3%.
There is little doubt that the falls in interest rates have improved mortgage lending conditions. Low rates have improved borrowers' affordability and have therefore stimulated demand – which can be clearly seen in house price growth which has been highest in the UK, Ireland and the Netherlands.
The level of mortgage debt as a percentage of GDP also grew steadily between 1998 and 2002. The UK is third in the European table at 62% behind the Netherlands at 88% and Denmark at 82%.
Studies have shown wide variations in the costs of buying a property and a mortgage in Europe. The costliest place is Greece and the cheapest Portugal. Expressed as a percentage of the property value, costs stand at 15% in Greece and 1% in Portugal. Buying a home in some countries remains significantly more expensive than in others.
Of course, there are a number of other influencing factors that must not be overlooked including taxation and subsidies. The European Mortgage Federation recently created an index based on four essential market factors. The UK comes out the highest and Portugal the lowest, demonstrating that the UK mortgage market has a wide range of product choice, ease of access and good levels of information and advice.
What is clear is that the UK has been successful in developing a competitive market and it is not an overstatement to say that it has shown Europe what a highly efficient mortgage market looks like.
I wonder if European markets have the benefit of the UK's efficient and effective intermediary market.