WRITTEN QUESTION No. 2758/97 by Gerhard SCHMID to the Commission. Property finance in the EU
Date: 1997-09-01
Institutions: European Parliament, SCHMID
Subjects: EU Member State, approximation of laws, credit guarantee, exchange transaction, land and buildings, mortgage, real estate credit, real property, single market, tax law

C 117/60

EN

Official Journal of the European Communities

16. 4. 98

The ESA management assured the Commission that solar cells were not a possible alternative to provide power
for the Cassini/Huyghens mission. This is particularly important, since it is an ESA/Italian development of solar
cells that was cited both in the United States and Europe as a possible alternative to the use of RTGs.

(98/C 117/74)

WRITTEN QUESTION E-2758/97

by Gerhard Schmid (PSE) to the Commission

(1 September 1997)

Subject: Property finance in the EU

In spite of the internal market it is still very difficult in the European Union to obtain finance from banks based in
one’s home country to purchase property abroad. Thus if a German wants to buy a house in Italy he must also set
up the finance in Italy, because German banks do not accept Italian property as security.

1. Would the Commission not agree that it is high time a uniform internal market was also created to cover
finance for the purchase of property?

2.

Are efforts already being made by the Commission to regulate this aspect by law? If not, why not?

Answer given by Mr Monti on behalf of the Commission

(8 October 1997)

The  existing  Community  legal  framework  permits  Community  credit  institutions  to  provide  mortgages  on
property in other Member States (1).

It is quite true that some credit institutions are reluctant to agree to finance purchases of property in Member
States other than their own. However, according to the information at the Commission’s disposal, a number of
specialist institutions allocated between 30% and 40% of their loans abroad in 1996.

The main reasons generally given by the more reluctant lenders are as follows:

› 

the mortgage market is still regarded as a geographically limited market calling for a detailed knowledge on
the part of the lender of the property market and property laws, as well as of local practice as regards the
valuation of property;

›  differences in national tax legislation create a number of problems for lenders. Some Member States, for
example, charge withholding tax on the net interest paid to foreign lenders, thereby reducing margins. Others
do  not  allow  insurance  premiums  paid  in  respect  of  a  mortgage  loan  from  an  insurance  company  not
established in the country to be offset against tax. The Commission is currently examining the compatibility
with Community law of some of these tax provisions;

› 

in the event of any default in payment, the lender is at the mercy of enforcement deadlines and procedures in
the other country.

These problems are particularly difficult to resolve. Taxation, for example, is a delicate area in which it has so far
proved  particularly  difficult  to  legislate.  Moreover,  resolving  these  problems  through  harmonisation  would
require the Community to legislate in the field of civil property law, and this could pose a number of problems,
particularly in relation to the principle of subsidiarity.

However, the Commission believes that the introduction of the single currency will have a beneficial effect on
cross-frontier property transactions since the exchange risk will disappear and consumers will find it easier to
compare mortgage rates. To increase this comparability, the Commission is currently looking into the possibility
of extending the provisions on the annual percentage rate of charge (APR) in Directive 90/88/EEC concerning
consumer credit (2) to the field of mortgage credit.

(1)  Directive 90/88/EEC, 22.2.1990 (OJ L 61, 10.3.1990).
(2)  Directive 89/646/EEC, 15.12.1989 (OJ L 386, 30.12.1989).