##s worth approximately sek 1 billion in february 2000 and loans worth approximately sek 8 billion in october 2000. bokredit, owned by den danske bank, has securitised a stock of mortgage loans to a value of sek 1. 3 billion. a new internet - based issuer of mortgage loans is europeloan, which started up operations in sweden in february 1999. europeloan is financing their internet based mortgage lending by securitisation of the loans abroad, up to now around sek 0, 5 billion. objections that have been expressed against securitisation include the fact that up until now it has been relatively complicated and costly to set up special purpose vehicles, and it has not been possible to invest the bonds at such favourable interest rates as their rating would imply. possible reasons are that the market is underdeveloped and the issues have been few, which has meant that liquidity in the bonds has been low. securitisation of mortgages is common in the usa, where around half of the total outstanding loans stock of secured loans is securitised. in europe, housing financing has mainly taken other forms. if competition in the mortgage market increases as a result of emu, it is likely that the need to finance mortgage loans as economically as possible will also increase. taking this into account, it is not unreasonable to believe that securitisation will become a more attractive option. increased competition can thus lead to a growing market for securitisation. alternatively, the opposite may apply, ie that improved opportunities for securitisation will increase competition. this is what happened in australia, where the mortgage market was deregulated during the 1990s. legislation facilitating securitisation reduced the previously high market entry barriers, paved the way for new players and reduced costs for borrowers by as much as a couple of percentage points. conclusion overall, most factors point to an increase in competition on the mortgage market. new forms of financing, new technology and possible emu participation will contribute to reducing costs for new players trying to enter the mortgage market. since mortgages are standardised products, lenders will compete on price, ie the rate of interest on the loan. the financing issue will therefore be a decisive one for issuers of mortgages. traditionally, mortgage institutions have financed their operations by borrowing using their entire balance sheet as collateral. this method of financing is relatively expensive for mortgage institutions and as competition on the mortgage market increases

. deposits 13 % 1 % dedicated savings mortgage bonds 19 % 62 % securitisation 5 % other source : the european mortgage federation the european mortgage bond market. shares by country by the end of 1999. 15 % 2 % 29 % 1 % denmark germany spain 7 % france 1 % austria sweden norway 45 % source : the european mortgage federation the european market for housing bonds is currently dominated by three countries - germany, denmark and sweden. together, these countries account for around 89 % of this market ( figure 4 ). switzerland 0, 7 germany spain italy belgium netherlands france 23, 84 11, 44 6, 8 1, 54 0, 9 0, 65 0, 03 uk billion us $ abs / mbs securitisation transactions by country, 1997. source : oecd competition for customers although mortgages are a relatively straightforward and standardised financial product that should be well suited to sell abroad, international mortgage sales have been limited to date. one probable reason is that the mortgage market mainly targets private clients, which are hard to reach without using a local distribution network. in this respect, the internet should be able to lead to greater transparency and competition, both by the credit issuers themselves supplying information and credit services over the internet and by internet - based brokerage sites finding the cheapest mortgages for borrowers. while internet - based mortgage services are still a relatively new phenomenon, they are likely to increase competition on the mortgage market. however, if we look at the spread between the cost of borrowing and the lending rate for mortgage institutions, there is no indication that the interest margin for mortgage institutions has fallen as a result of increased competition ( figure 5 ). mortgage institutions´ long term interest margin. % sep mar sep mar sep mar sep mar sep mar sep 1995 1996 1996 1997 1997 1998 1998 1999 1999 2000 2000 interest rate on mortgage institutions´ borrowing, 5 years mortgage institutions´ insterast rate on lending, 5 years. the new internet - based players on the mortgage market are made up of those who mediate loans via the internet and those who issue credit over the internet. players such as blockbid, bolaneborsen, comboloan and e - loan search for and mediate the cheapest mortgages for borrowers. europeloan, on the other hand, is an internet - based credit issuer that has operated in sweden since february 1999. the company, which also operates in belgium and germany, finances mortgages through securitisation. as