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        • UK priorities & key considerations

The UK welcomes the work the Commission has undertaken to examine the barriers to further European integration in mortgage credit markets.

Increased efficiency and competitiveness in these markets have the potential to contribute to the overall growth of the EU economy. However, the potentially significant impact on UK firms and consumers has led us to make great efforts to ensure that the Commission and European Parliament understand and take account of UK views. We and the Treasury are working closely with UK stakeholders to achieve this.

What does the Commission need to focus on?

To achieve its goals, we strongly believe the Commission should focus its future work according to the following priorities:

• Better enforcement. It is important that all Member States implement and enforce existing Directives that affect mortgage lenders' ability to undertake cross-border activity.

• Alternatives to regulation. The Code of Conduct and the European Land Information Service (EULIS) project are examples of alternatives to regulation that have enjoyed some success to date. EULIS is a cooperative venture between national land registries, creating a portal which allows worldwide access to electronic land title registries. The UK welcomes the Commission’s willingness to explore market-led initiatives, for example, in the areas of mortgage funding and credit data access. Non-legislative action should be fully explored as a way of bringing similar benefits but at reduced cost, before any decision is made on legislation.

• Better regulation. The UK supports the Commission’s consultative approach and its emphasis on better regulation principles. It is critical that any proposal is accompanied by full cost benefit analysis to demonstrate that the cost of the proposal is proportionate to its expected benefits.

• Global markets. It is important to retain a global perspective. While mortgage credit markets are very localised, wholesale markets that provide the funding for EU mortgages are international.

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What are the UK's priorities?

To help inform considerations in Europe, we and the Treasury have set out in detail our priorities and highlighted the key points we believe the Commission and the European Parliament should take account of.

The priorities we have identified for the Commission are:

• Exploring improvements in the efficiency of mortgage funding arrangements and liberalising regimes that restrict mortgage lending to particular entities (such as deposit takers).

• Increasing non-discriminatory cross-border access to consumer credit data, while maintaining key data protection safeguards.

• Developing trusted common valuation standards that can be widely used and understood by valuers and lending institutions.

• Raising confidence in repossession procedures, while maintaining consumer safeguards.

• Encouraging the development of market-based solutions such as the EULIS approach to land registry information.

We are also stressing to the Commission the need to take full account of the following:

• National markets differ, and the reasons for these differences - such as culture, tradition and language - are unlikely to be addressed through Commission intervention. The persistence of such differences is relevant both to:

  • the assessment of costs and benefits (the full theoretical benefits of a truly integrated market are unlikely to be delivered); and

  • the approach to disclosure - which needs to be sufficiently flexible to reflect these differences.

• Legislative intervention in the mortgage market can be very costly and should only be considered if the benefits outweigh the costs. It is important to have a clear understanding of the costs and benefits of individual measures as these can vary greatly. Drawing on the UK experience, where intervention was for specific national reasons, action on disclosure and advice is particularly expensive.

• While disclosure is of great importance in ensuring consumer protection, we question whether the absence of harmonised disclosure requirements is a key barrier to integration. Neither the Commission nor London Economics suggest that cross-border shopping by consumers is going to be a significant contributor to integration.

• Advice can be an important service for some consumers and should be of good quality where it is given. However, there is no evidence to suggest that an integrated market requires all consumers to be given advice.

• Although the UK regime does regulate information and advice, this was established to tackle specific detriment in the UK market and not due to a lack of completeness in the market.

Given these considerations, and in the absence of evidence setting out a clear basis for regulation, we believe the case for new Commission legislation has yet to be made.

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