As noted by the Governor of the Bank of England, the predominance of the variable rate mortgage in the U.K. is an artifact of the inflationary environment that has prevailed throughout much of the post war period. Low inflation, he predicted, may reduce demand for housing as an inflation hedge and lead to more fixed rate borrowing. Finally, introduction of the Euro may require indexation of some variable rate contracts. It is hoped that introduction of the Euro will eventually lead to greater competition through cross-border lending. Registration, valuation and foreclosure systems vary across countries and offer varying degrees of certainty to lenders affecting willingness to lend and pricing.
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