A US-style European mortgage fund has been proposed as a way of providing for cheaper 25-year fixes with no redemption penalties.
The European Mortgage Finance Agency is seeking EU legislative changes to create a secondary mortgage market along the lines of Fannie Mae and Freddie Mac in the US.
Rob Thomas, general manager of EMFA, says that with a standardised secondary mortgage market in Europe it will be possible to fund more affordable long-term rates.
He says: “From the consumer's point of view anything that creates cheaper funding sources will create lower mortgage rates. There is a product gap in most European countries – you cannot buy a long-term fixed rate mortgage without redemption penalties whereas that is the standard loan in the US.”
The scheme is supported by five EU lenders: Northern Rock, Irish Life & Permanent, Credit Agricole in France, BBVA in Spain and BCP in Portugal.