CML news & views

The European Commission should abandon plans to encourage greater integration of national mortgage markets while current market disruption persists, we believe. Rapidly changing mortgage market conditions - both in the UK and Europe - together with uncertainty about future developments mean that planning for further market integration is pointless at this stage. 

Market conditions have already changed significantly since the Commission published a white paper outlining its proposals for greater integration of European mortgage markets at the end of last year. Given current uncertainty about the direction of developments, we believe that the only sensible option at this stage is to drop any proposals and start again by analysing what future market conditions might look like. 

Meanwhile, the Commission has already launched a broad programme of work on financial stability, which we believe is sensible and timely. We believe that the Commission recognises that proposals for market integration are unlikely to produce a net benefit in the current climate. 

Before the white paper was published last December, the Commission had also launched a separate study of the role of intermediaries in European financial services markets. We believe it would make little sense to pursue any plans for European mortgage market integration before the scheduled publication of the intermediary study this autumn.  The reality is that current global market disruption could, in any case, affect the role of intermediaries. 

The white paper is based on the findings of the now outdated reports published by London Economics and Mercer Oliver Wyman and is predicated on the view that the market will continue to grow, while the range of products diversifies. But while such an outlook is now unrealistic, it is far from clear how the market will change as a result of the credit crisis and other developments.   

Even before the onset of current market disruption, there was a real danger that the Commission’s approach to mortgage market integration would be flawed. The reality is that moves towards integration are much more likely to be driven by lenders - not consumers - crossing national boundaries. We therefore believe that measures to harmonise consumer protection would be largely irrelevant in delivering market integration, although potentially costly and disruptive for the industry. 

We also continue to believe that, following a period of sensible re-assessment of how plans for integration should be shaped by changing market conditions, any proposals should be the subject of rigorous cost-benefit analysis.