White paper on the integration of EU mortgage credit markets {SEC(2007) 1683} {SEC(2007) 1684}
Date: 2007-12-18
Institutions: European Commission
Subjects: competitiveness, consumer information, credit guarantee, financial solvency, financing, mortgage, real estate credit, single market

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 18.12.2007 
COM(2007) 807 final 

WHITE PAPER 

on the Integration of EU Mortgage Credit Markets 

(presented by the Commission) 

{SEC(2007) 1683} 
{SEC(2007) 1684} 

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WHITE PAPER 

on the Integration of EU Mortgage Credit Markets 

(Text with EEA relevance) 

1. 

INTRODUCTION 

Mortgage credit is, for most European citizens, the biggest financial investment of a lifetime. 
Mortgage  credit  markets  represent  a significant  part  of  Europe's  economy,  with  outstanding 
residential mortgage credit balances representing almost 47% of the EU GDP1. Accordingly, 
the integration of EU mortgage credit markets is central to a more efficient functioning of the 
EU financial system both at the wholesale and the retail level as well as the EU economy as 
a whole. 

Aware  of  the  crucial  importance  of  mortgage  credit  markets,  the  Commission  initiated 
a comprehensive review of the functioning and the level of integration of these markets. This 
White Paper summarises the conclusions of this review and presents a balanced 'package' of 
measures  to  improve  the  efficiency  and  the  competitiveness  of  EU  residential  mortgage 
markets2. In full compliance with the principles of better regulation, these measures have been 
designed after thorough consultation with all stakeholders and on the basis of a proportionate 
impact assessment3.  

The Commission has also duly taken into account, where possible and appropriate, the lessons 
that can already be drawn from the recent events in financial markets.  However,  this White 
Paper is not as such a response to the current financial turmoil that originated from problems 
in  the  US  sub-prime  market.  This  turmoil  has  wider  implications,  which  have  been  more 
comprehensively addressed by the ECOFIN Council at its meeting of 9 October 2007.  

The  policy  orientations  presented  in  the  White Paper  will  be  further  developed  in  close 
cooperation  with  all  stakeholders.  They  will  be  subject  to  individual  impact  assessments, 
including a quantitative cost-benefit analysis, before their adoption by the Commission.  

This  White Paper  shall  be  placed  in  the  context  of  the  Commission  Communication  on 
a Single  Market  for  21st  Century  Europe4,  which  underlined  the  benefits  that  the  European 
economy could derive from a greater integration of retail financial services markets. 

2. 

EU CASE FOR ACTION 

The Treaty provides the basis for the creation of a single market and the abolition of obstacles 
to the free movement of goods, persons, services and capital. Evidence however shows that 
the single market for residential mortgages is far from integrated. Obstacles exist that restrict 
the level of cross-border activity on the supply and demand sides, thus reducing competition 
and choice in the market.  

1 

2 

3 
4 

HYPOSTAT  2005:  A  review  of  Europe's  Mortgage  and  Housing  Markets,  European  Mortgage 
Federation, November 2006, p. 140. 
The  review  covers  loans  secured  by  a  mortgage  or  by  another  comparable  surety  as  well  as  loans  to 
purchase property. 
See Impact Assessment for further information. 
COM(2007) 724,  20.11.2007  and  SEC(2007) 1520,  20.11.2007.  See  also  COM(2005) 629, 1.12.2005; 
COM(2007) 33, 31.1.2007 and SEC(2007) 106, 31.1.2007; and COM(2007) 226, 30.4.2007. 

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One study estimates the potential economic benefits from integrating EU mortgage markets as 
0.7%  of  EU GDP  and  0.5%  of  private  consumption  over  the  next  ten  years5.  The  study 
suggests  that  these  benefits  could  lower  mortgage  interest  rates  by  up  to  47 basis  points 
by 2015, thereby reducing the interest payable on a EUR 100 000 mortgage loan by EUR 470 
per  year6.  Another  study  puts  the  benefits  at  0.12–0.24%  of  EU GDP  per  annum7.  The 
estimated  benefits,  which  could  be  slightly  different  today  given  the  evolution  of  market 
conditions,  arise  from  the  increased  efficiency  of  mortgage  lenders  and  the  availability  of  a 
wider range of products.  

Limits  to  the  potential  for  integration  should  however  be  acknowledged.  The  influence  of 
factors such as language, distance, consumer preferences, or lender business strategies cannot 
be  underestimated.  However,  other  factors,  which  prevent  the  conduct  of  business  or 
substantially raise the cost of business for offering or taking out a mortgage credit in another 
EU Member State, can be addressed by appropriate policy initiatives. 

The  Commission  recognises  that  consumers  predominantly  shop  locally  for  mortgage  credit 
and  that  the  majority  will  probably  continue  to  do  so  for  the  foreseeable  future.  The 
integration of EU mortgage markets will therefore be essentially supply-driven, in particular 
through various forms of establishment in the Member State of the consumer.  

3. 

OBJECTIVES 

Competitive  and  efficient  EU  mortgage  credit  markets  can  be  achieved  by  measures  which 
facilitate  the  cross-border  supply  and  funding  of  mortgage  credit,  increase  the  diversity  of 
products, improve consumer confidence and promote customer mobility.  

3.1. 

Facilitating the cross-border supply and funding of mortgage credit  

Financial services providers can supply mortgages cross-border in several ways: through local 
presence  (e.g.  branches,  subsidiaries,  mergers  and  acquisitions);  through  direct  distribution 
channels  (e.g.  via  telephone  or  the  internet);  or  through  local  intermediaries  (e.g.  brokers). 
Financial  services  providers  can  also  engage  in  cross-border  activity  by  purchasing 
a mortgage portfolio from a mortgage lender in another Member State.  

The  existence  of  differing  legal  and  consumer  protection  frameworks,  of  fragmented 
infrastructures  (e.g.  credit  registers),  as  well  as  the  lack  of  appropriate  legal  frameworks  in 
some instances (e.g. for mortgage funding), create legal and economic barriers, which restrict 
cross-border  lending  and  prevent  the  development  of  cost-efficient,  pan-EU  funding 
strategies.  The  Commission  therefore  seeks  to  remove  disproportionate  obstacles,  thus 
reducing the costs of selling mortgage products across the EU. 

The Commission believes that the different mortgage funding instruments are complementary 
rather than substitutable. The aim should be to facilitate, and not restrict, the development of 
a wide range of mortgage funding instruments. The use of funding techniques that transfer the 
risk  of  mortgage  loans  away  from  the  originating  mortgage  lenders  to  the  capital  markets 
provides  benefits  in  terms  of  risk  diversification  and  funding  costs.  However,  recent 
experiences have highlighted the need to ensure that such techniques are used in a way that is 
not detrimental to financial stability.  

5 
6 
7 

The Costs and Benefits of Integration of EU Mortgage Markets, London Economics, August 2005, p. 5. 
Cf. footnote 5, p. 5. 
Study  on  the  Financial  Integration  of  European  Mortgage  Markets,  Mercer  Oliver  Wyman  and  the 
European Mortgage Federation, October 2003, p. 77–78. 

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3.2. 

Increasing product diversity 

Although a wide range of products is available across the EU, no single domestic market can 
be  considered  as  having  a  complete  range  of  mortgage  products,  in  terms  of  either  product 
characteristics or borrowers served. This is due, to some extent, to factors such as consumer 
preferences or different business strategies adopted by mortgage lenders. However, economic 
and legal barriers also exist which prevent mortgage lenders from offering certain products in 
certain  markets  or  opting  for  a  given  funding  strategy.  In  this  respect,  barriers  to  product 
diversity are closely related to the other barriers inhibiting cross-border activity by mortgage 
lenders.  

the  barriers 

that  removing 

An  increase  in  product  diversity  has  been  identified  by  a  number  of  studies  as  the  crucial 
element  for  achieving  most  of  the  benefits  of  mortgage  market  integration.  One  study 
increase 
estimates 
EU consumption  by  0.4%  and  EU GDP  by  0.6%  over  the  next  ten  years  (compared  to 
an estimated overall increase in EU consumption by 0.5% and in EU GDP by 0.7%)8. Another 
study suggests that improved product diversity would lead to a 10% expansion in the market 
size by enabling new borrowers to access mortgage credit, and a quarter of existing borrowers 
to  find  more  suitable  products,  bringing  annual  benefits  of  between  0.15%  and  0.30%  of 
residential mortgage balances, equivalent to 0.06–0.12% of GDP in 20039. 

to  product  availability  alone  would 

The Commission seeks to increase the diversity of products that could meet consumers' needs, 
by removing barriers to the distribution and sale of products, particularly new and innovative 
mortgage products. The Commission recognises the fact that many of the rules which restrict 
the  offering  of  certain  products  on  a  cross-border  basis  have  been  designed  to  protect 
consumers  and/or  preserve  financial  stability.  The  problems  which  occurred  recently  on  the 
US sub-prime market serve as useful reminders of the importance of not taking undue risks 
with  these  crucial  public  policy  objectives.  The  Commission  wishes  nevertheless  to  explore 
ways  through  which  greater  product  diversity  can  be  combined  with  strong  consumer 
protection and adequate financial stability.  

3.3. 

Improving consumer confidence 

Taking  out  a  mortgage  credit  is  an  important  decision  for  any  consumer.  The  Commission 
believes that there can be no efficient market without confident and empowered consumers, 
who are able to seek out and choose the best mortgage product for their needs, regardless of 
the  location  of  the  mortgage  lender.  In  order  to  make  an  appropriate  choice,  consumers 
require clear, correct, complete and comparable information on different mortgage products. 

The Commission considers it essential that mortgage lenders lend responsibly, in particular by 
thoroughly assessing the borrowers' ability to pay instalments in the context of the transaction 
envisaged. They can do such an assessment in a variety of ways, for example by consulting 
a database.  Irresponsible  lending  and  mis-selling  of  mortgage  loans  by  mortgage  lenders  or 
unscrupulous credit intermediaries can, as illustrated by the current sub-prime turmoil, have 
a negative impact on the economy at large.  

Good  advice,  including  legal  advice,  is  an  important  element  in  enhancing  consumer 
confidence. It is distinct from information, which is merely a description of the product. The 
Commission wishes to promote high-level mortgage advice standards, whilst recognising that 
not all consumers need the same level of advice.  

8 
9 

Cf. footnote 5, p. 6. 
Cf. footnote 7, p. 78. 

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3.4. 

Facilitating customer mobility 

Customer mobility and the propensity of consumers to switch mortgage lenders can influence 
the level of competition in the market. The Commission wishes to facilitate customer mobility 
by  ensuring  that  consumers  seeking  to  change  mortgage  lenders  are  not  prevented  or 
dissuaded from doing so by the presence of unjustifiable legal or economic barriers. 

Price  transparency,  through  the  provision  of  clear  and  comparable  information,  has 
an important role to play in facilitating customer mobility. Initiatives to improve the quality 
and clarity of pre-contractual information are therefore vital to ensure that consumers are fully 
aware  of  all  the  different  costs  and  product  characteristics.  Information  alone  cannot, 
however,  facilitate  customer  mobility.  By  increasing  switching  costs,  'tying'  practices 
(e.g. obliging the consumer to open a current account or take out an insurance policy with the 
same company when purchasing a mortgage credit) effectively bind consumers to a particular 
financial  services  provider,  thus  restricting  mobility  and  weakening  competition.  Practices 
such  as  obliging  consumers  to  transfer  their  salary  to  the  current  account  attached  to  the 
mortgage  credit  may  have  a  similar  effect.  These  practices  not  only  have  implications  for 
customer  mobility  but  can  also  reduce  price  and  product  competition  in  the  markets  for  the 
tied  and  tying  products  and  discourage  the  entry  of  new  players,  particular  those  providers 
specialising in the tied product. 

4. 

ACHIEVING THE OBJECTIVES 

The  Commission  believes  that  to  achieve  these  objectives  further  work  is  needed  to  deliver 
the most appropriate policy-mix.  

4.1. 

Assessing the need for legislation 

On the basis of its review, the Commission believes that the following elements are the key 
issues  to  be  addressed:  pre-contractual  information;  Annual  Percentage  Rate  of  Charge 
(APRC); responsible lending and early repayment.  

While the general impact assessment accompanying this White Paper suggests that legislation 
would  be  for  some  areas  the  most  effective  policy  option  to  achieve  the  set  objectives,  the 
Commission is of the view that further analysis and consultation with stakeholders must take 
place before a final political assessment can be made on the most appropriate way forward.  

In  particular,  in  line  with  its  better  regulation  principles,  the  Commission  will  undertake 
a rigorous impact assessment, including a quantitative cost-benefit analysis of various policy 
options for all issues, in order to ensure that costs do not outweigh the expected benefits. Until 
this detailed work has been undertaken and further consultation with stakeholders have been 
concluded,  the  Commission  considers  that  it  would  be  premature  to  decide  on  whether  a 
Directive would deliver the necessary value added. 

Early repayment 

The  Commission  views  early  repayment  as  one  of  the  most  important  issues  for  integrating 
EU  mortgage  markets.  The  impact  assessment  underlines  the  consequences  of  early 
repayment  terms  and  conditions  for  all  four  Commission  objectives.  It  also  highlights  the 
importance of early repayment for product diversity, which is identified by studies as one of 
the crucial elements for bringing the benefits of mortgage credit integration. In this context, 
the  Commission  believes  that  successfully  addressing  the  issue  of  early  repayment,  in  full 
awareness  of  the  diversity  of  early  repayment  regimes  across  Member  States,  would  enable 
the full benefits of an integrated European mortgage markets to be reaped. The Commission 
acknowledges  the  political  sensitivity  of  this  issue,  and  the  complexity  of  finding  an 

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appropriate  level  of  harmonisation  (as  shown  by  the  difficulties  encountered  in  the  field  of 
consumer  credit).  It  believes,  however,  that  it  shares,  together  with  Member States  and  the 
European Parliament, a responsibility to do all it can to allow European households to benefit 
from a wider range of contractual deals when taking out mortgage loans. The Commission is 
therefore  determined  to  explore,  in  particular  with  Member States  and  the  European 
Parliament, to what extent it would be possible to reach a consensus on an adequate European 
regime for early repayment.  

In 2008, the Commission will: 

–  immediately explore possible policy options for early repayment; 

–  assess  the  costs  and  benefits  of  different  policy  options  for  early  repayment  (status  quo, 

contractual option or mandatory right, level of compensation etc.). 

Improving the quality and comparability of information 

Preliminary  results  of  consumer  testing  undertaken  by  the  Commission  show  that  it  is  very 
important for consumers to obtain pre-contractual information in a structured form allowing 
for  comparison  between  offers.  These  results  indicate  that  information  should  be 
comprehensive,  include  tables  and  concrete  examples  and  employ  simple  wording  with 
a limited use of technical jargon. Such information should be provided sufficiently before the 
conclusion of the contract. 
In  spite  of  the  important  role  that  the  Code  of  Conduct  on  Home  Loans10  (the  Code)  has 
played,  the  level  and  quality  of  information  currently  provided  to  consumers  on  mortgage 
credit still varies between Member States. The Commission considers that the Code is, on the 
one hand, somewhat outdated and, on the other hand, has not been a fully adequate substitute 
for binding rules. Adherence to the Code is not optimal11 and it lacks effective monitoring and 
enforcement mechanisms, affecting its credibility with consumers. In addition, divergences in 
its  application  in  different  countries,  such  as  when  the  European  Standardised  Information 
Sheet must be handed to the consumer, have created difficulties12. 

The APRC is a critical element of the information provided to consumers. The existence of 
different  calculation  methods  and  cost  bases  may  limit  the  true  comparability  of  different 
products, in particular on a cross-border basis, and thus mislead consumers. Harmonisation of 
the APRC is essential to ensure high quality information standards and true comparability of 
different mortgage products for consumers.  

In 2008, the Commission will: 

–  finalise a revised European Standardised Information Sheet (ESIS) on Home Loans, using 
to the largest extent possible the positive results13 achieved by the Expert Group composed 
of  lenders  and  borrowers  that  the  Commission  convened  in  2006,  and  building  on  the 
initial results of consumer testing undertaken by the Commission in 2007; 

10 

11 

12 
13 

European Agreement on a Voluntary Code of Conduct on Pre-contractual Information for Home Loans, 
5.3.2001. 
See for example: European Agreement on a Voluntary Code of Conduct on Pre-contractual Information 
for  Home  Loans:  Second  Progress  Report  on  Implementation  in  the  European  Union,  European 
Banking 
that  although  adherence  and 
implementation of the Code in some markets was close to 100%, in other markets the situation was less 
satisfactory,  and  Monitoring  the  Update  and  Effectiveness  of  the  Voluntary  Code of  Conduct  on Pre-
Contractual Information for Home Loans, Institute for Financial Services, 17.6.2003. 
Mortgage Industry and Consumer Dialogue Final Report, 20.12.2006. 
Notably, in terms of risk warnings and foreign currency loans. 

Industry  Committee,  13.12.2005,  which  confirmed 

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–  test more broadly this revised ESIS with consumers in all Member States; 

–  examine  to  what  extent  the  provisions  on  APRC  contained  in  the  proposed  Consumer 
Credit Directive could be extended to mortgage credit either as they are or in a way which 
takes into account the specificities of mortgage credit; 

–  assess the cost and benefits of the different policy options. 

Promoting responsible lending and borrowing 

The  Commission  believes  that  –  for  the  benefit  of  all  stakeholders  (consumers,  investors, 
lender's  shareholders,  etc.)  –  mortgage  lenders  and  intermediaries  should  be  required  to 
adequately assess, by all appropriate means, borrowers' creditworthiness before granting them 
a mortgage loan. It should be also ensured that mortgage lenders are not discriminated against 
when  accessing  credit  registers  cross-border  and  that  credit  data  circulates  smoothly,  while 
complying fully with EU data protection rules. 

The  Commission  considers  that  mortgage  lenders  should  provide  full  information  and 
adequate explanations to the consumer, so that the latter makes a well informed choice, but 
should not be legally compelled to provide advice. Making the giving of advice compulsory 
may  have  a  negative  impact  on  mortgage  prices  and  limit  the  range  of  products  that 
consumers  choose  from,  as  mortgage  lenders  would  naturally  provide  advice  on  their  own 
range  of  products.  Advice  should  rather  be  provided,  at  the  consumer's  request,  by 
independent  advisors  or  by  the  lender.  However,  when  advice  is  provided,  it  should  be  in 
accordance with high level principles. In this context, it is essential that consumers can access 
objective  advice,  which  is  based  on  their  individual  profile  and  commensurate  with  the 
complexity of the products and risks involved. It is also essential that consumers provide full 
and accurate information to the advisor. 

In 2008, the Commission will: 

–  consult with all stakeholders about the design of high-level advice standards; 

–  examine to what extent the provisions on non-discriminatory cross-border access to credit 
registers  and  the  duty  to  explain  contained  in  the  proposed  Consumer  Credit  Directive 
could be extended to mortgage credit; 

–  explore means of further increasing responsible lending, drawing on lessons from the US 

sub-prime crisis; 

–  assess the cost and benefits of the different policy options. 

In  order  to  assist  the  Commission  in  the  preparation  of  adequate  measures  improving  the 
accessibility,  comparability  and  completeness  of  credit  data,  an  Expert  Group  on  Credit 
Histories will be created in 2008. 

Improving  consumers'  financial  literacy  can  also  help  them  to  assess  the  best  products  and 
services for their individual needs. The Communication on Financial Education published 
alongside this White Paper sets out the Commission's support for the provision of high-quality 
financial education across the EU. 

The  Commission  believes  that  all  issues  of  applicable  law  related  to  the  mortgage  contract 
should be addressed within the "Rome I" Regulation, recently agreed by the Council and the 
European Parliament. On the law applicable to the mortgage collateral, the Commission sees 
no reason to depart from the well established principle that the law of the country in which the 
property is situated applies. 

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4.2. 

Valuation, land registers and foreclosure procedures 

The Commission considers that Member States should improve the efficiency of their forced 
sales  and  land  registration  procedures.  These  factors  raise  the  cost  of  doing  business  for 
mortgage  lenders,  increase  the  uncertainty  for  investors  about  the  quality  of  the  underlying 
security  and  elevate  refinancing  costs,  reducing  the  efficiency  of  existing  providers  and 
deterring new market entrants.  

The  Commission  will  publish  regularly  updated  'scoreboards',  presenting  objective 
information  on  the  cost  and  duration  of  land  registration  and  foreclosure  procedures  in  all 
Member States. 

In  2008,  the  Commission,  subject  to  an  appropriate  impact  assessment,  will  present 
a Recommendation. This Recommendation would in particular: 

–  invite  Member States  to  ensure  that  their  foreclosure  procedures  are  completed  within 
a reasonable time and at a reasonable cost, and that their land registers are available online; 
–  encourage Member States to adhere to the EULIS14 project which has been sponsored by 

the Commission's eContent programme; 

–  invite  Member States  to  introduce  more  transparency  and  reliability  into  their  land 

registers, in particular with regard to hidden charges; 

–  invite  Member States  to  facilitate  the  use  of  foreign  valuation  reports,  and  promote  the 

development and use of reliable valuation standards. 

4.3. 

Infringement policy 

The Commission will continue applying a robust infringement policy. In particular, in 2008, 
the Commission will investigate whether:  

–  some  of  the  national  rules  which  create  obstacles  to  the  circulation  of  credit  data,  or 
prevent  credit  bureaux  from  providing  services,  constitute  an  infringement  of  the  Treaty 
without prejudice to EU data protection rules; 

–  the prohibition of  including non-domestic  EU mortgage loans in cover pools  for covered 
bonds,  which  currently  exists  in  some  Member States,  is  compatible  with  the  free 
movement of capital and the freedom to provide services. 

4.4. 

Follow-up of the Mortgage Funding Expert Group 

Given  the  scope  for  enhancing  the  efficiency  of  EU  mortgage  funding  markets,  the 
Commission plans to continue its analysis of the nature, the causes and the magnitude of the 
problems  identified  by  both  the  Mortgage  Funding  Expert  Group15  and  the  European 
Financial Markets Lawyers Group's Working Group on Securitisation16. While doing so, the 
Commission will take into account recent developments in sub-prime markets, the complexity 
and  the  horizontal  dimension  of  the  obstacles  identified,  as  well  as  the  wide-ranging 
implications for all stakeholders. 

14 

15 
16 

European Land Information Service (EULIS), which currently has ten participants, aims to provide easy 
cross-border access to information about ownership and interests in land and property via the Internet 
(www.eulis.org). 
Report of the Mortgage Funding Expert Group, 22.12.2006. 
Legal Obstacles to cross-border securitisation in the EU, European Financial Markets Lawyers Group, 
Working Group on Securitisation, 7.5.2007.  

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In particular, the Commission will examine: 

–  market practices and prudential standards for the management of liquidity mis-match risk, 
arising  for  instance  from  using  short  term  funding  for  long  term  mortgage  loans,  in 
particular with regard to the ability to withstand stressed market conditions; 

–  mortgage lenders incentives to move risk off balance sheet; 

–  prudential standards and the transparency of banks' exposures to securitisation transactions 

that are directly or indirectly related to mortgage credit; 

–  whether further measures to improve transparency from the end investors' perspective are 

necessary.  

The  Commission  expects  the  market  to  bring  appropriate  and  rapid  responses  to  the  issues 
raised by the Economic and Financial Affairs Council on 9 October 2007, in particular on the 
issues of transparency and valuation of complex financial instruments. 

Depending on future developments in financial markets, the creation of an Expert Group on 
Securitisation could be envisaged, with a view to developing an appropriate horizontal policy 
response to the complex challenges of securitisation. 

Further research 

4.5. 
As announced in the Green Paper on Retail Financial Services17, the Commission is currently: 

–  reviewing  the  role  and  regulation  of  non-credit  institutions  in  EU  mortgage  markets  to 
assess  whether  appropriate  action  at  Community  level  is  needed.  A  study  will  be 
undertaken and the results will be available in 2008. The Commission is, in principle, in 
favour of allowing non-credit institutions to be active in the mortgage lending business, but 
deems it essential that responsible lending, financial stability and effective supervision are 
not in any way compromised.  

–  reviewing  the  national  regulatory  frameworks  under  which  equity  release  products  are 
marketed,  in  order  to  assess  whether  action  at  Community  level  is  justified.  A  study  of 
equity  release  schemes  will  also  be  undertaken  and  the  results  will  be  available  in  2008. 
While  acknowledging  the  potential  economic  role  of  equity  release  products  (such  as 
'reverse mortgages'), the Commission is also aware that there are potential risks connected 
with equity release products. 
its  Communication  on  a  Single  Market  for  21st  Century  Europe  released 
in 
In 
November 200718,  the  Commission  announced  its  intention  to  investigate  tying  and  other 
unfair  practices  for  credit,  accounts,  payments  and  insurance,  in  order  to  measure  their 
impact on mobility. The Commission's objective is to develop a horizontal initiative on unfair 
commercial practices in the field of retail financial services, including mortgage credit. 

Interest  rate  restrictions  (e.g.  anti-usury  rules,  interest  variation  limits,  prohibition  of 
compound  interest  etc.)  which  are  in  place  in  some  Member States,  may  prevent  the  cross-
border circulation of some products. Their implications on diversity and cross-border business 
must  be  carefully  weighted  against  the  fact  that  they  may  fulfil  an  important  social  and 
consumer protection role, and are in place in a limited number of Member States. Against this 
background, the Commission will publish a horizontal study in 2010, evaluating the impact of 
these rules on the Single Market, in the light of their objectives. 

17 
18 

COM(2007) 226, 30.4.2007. 
COM(2007) 724, 20.11.2007, and SEC(2007) 1520, 20.11.2007.  

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5. 

CONCLUSIONS 

This White Paper has identified a package of proportionate measures designed to enhance the 
competitiveness  and  efficiency  of  EU  mortgage  markets  which  will  benefit  consumers, 
mortgage  lenders and  investors alike. Given the  importance  of  mortgage  credit  for  both  EU 
citizens  and  the  economy  at  large,  an  evidence  based  approach  has  been  adopted.  While 
recent  events  in  global  mortgage  markets  have  confirmed  the  pertinence  of  the  approach 
proposed,  they  have  also  identified  areas  where  further  work  needs  to  be  undertaken.  The 
Commission intends to engage quickly with all stakeholders to complete its assessment of the 
various policy options.  

To  be  effective,  any  proposed  measures  must  demonstrate  that  they  will  create  new 
opportunities  for  mortgage  lenders  to  access  other  markets  and  engage  in  cross-border 
activity. They should also be shown to enable a more efficient mortgage lending process, with 
economies  of  scale  and  scope,  which  should  lower  costs.  The  expected  benefits  should  be 
balanced against the possible costs of these measures.  

The  work  carried  out  so  far  suggests  that  significant  benefits  can  be  expected  from  further 
action in several of the areas identified in this White Paper. Many of the measures designed to 
improve  the  efficiency  and  competitiveness  of  cross-border  mortgage  lending  –  both  on 
primary  and  secondary  markets  –  would  also  lead  to  improved  product  diversity  and, 
potentially,  lower  prices  for  consumers.  The  White Paper  identified  the  importance  of  good 
information,  responsible  lending  and  borrowing,  and  high  quality  advice  for  consumers  in 
ensuring  they  purchase  the  best  product  for  their  needs.  Consumers  should  also  be  the 
beneficiaries  of  efforts  to  improve  customer  mobility  through  increased  transparency  and 
reduced product tying.  

In  general  terms,  investors  would  face  a  lower  risk  when  investing  in  mortgage  backed 
products through enhanced market transparency, greater certainty as to the recovery value of 
their  investment,  and  a  broader  range  of  investment  opportunities  as  a  result  of  enhanced 
product diversity both on primary and secondary markets. 

EN 

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ANNEX  

Main tasks or activities announced in the White Paper 

To be delivered by 

Actions 

2008 

2008 

2008 

2008 

2008 

2008 

2008 

2008 

2008 

2008-2009 

2010 

Preparation of an impact assessment on early repayment, pre-contractual 
information, Annual Percentage Rate of Charge, access to credit registers, 
assessing creditworthiness and advice standards and consultations with 
key stakeholders on the issue of early repayment 

Consumer testing of revised European Standardised Information Sheet 

Establishment of an Expert Group on Credit Histories 

Publication of study on the role and regulation of non-credit institutions in 
EU mortgage markets 

Publication of study on equity release 

Possible establishment of an Expert Group on Securitisation 

Look into the exclusion of non-domestic EU mortgage loans in cover 
pools for covered bonds and other aspects of the functioning of mortgage 
markets from the viewpoint of the free movement of capital guaranteed 
under the EC Treaty 

Publication of a study to investigate tying and other unfair practices for 
credit, accounts, payments and insurance 

Presentation of a Recommendation on land registration, foreclosure and 
property valuation 

Publication of scoreboards on the cost and duration of land registration 
and foreclosure procedures 

Publication of a study evaluating the need for and the justification of 
interest rate restrictions (e.g. anti-usury, interest variation and compound 
interest rules) vis-à-vis their impact on the Single Market 

EN 

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   EN