Speaking to FTAdviser, Lord Harrison, chairman of the EU economic and financial affairs sub committee, said he gets the impression that the mortgage industry is very much on the defensive, looking to protect what they have got, rather than expand across borders.
“My approach is that we do indeed have a very well-developed mortgage industry, but that means that rather than fear what is coming from Europe, we should look at the opportunities from participating in credit markets across the EU single market,” he commented, adding that while the prime minister talks of European integration “he isn’t actually doing a thing about it”.
Lord Harrison argued that UK lenders should leverage their financial strength and reputation for innovation to grow and take advantage of the 500 million people in 28 other countries.
“I certainly think some open-minded, entrepreneurial European lenders will be looking across into our market and seeing opportunities.”
Lord Harrison was speaking last week at the Westminster Business Forum event with Adrian Steiner, policy officer for retail financial services at the European Commission, who explained the UK was already very far ahead in transposing the Mortgage Credit Directive, while other member states would likely run closer to the 21 March deadline.
When asked about the potential for cross-border business, he said that the EC was very interested in fostering a functioning single market.
“Retail financial services markets are still very domestically organised, with few cross border products, so this is something we’d like to look into further.”
Mr Steiner added that it is quite likely the EC will publish a green paper consultation to get a better understanding of the different markets, addressing issues from a consumer perspective and also from a supply side.
“Banks often say that the anti-money laundering rules deny them the ability to offer cross border products,” Mr Steiner noted.
“You also have incumbent operators and new competitors - it will depend on winning new customers in other member states.”
As FTAdviser previously reported, the Financial Conduct Authority’s technical mortgage specialist Keith Hale told delegates at the same event that the new regulatory regime will impact the UK’s mortgage market less than other EU member states, describing the changes as “incremental”.
As for opportunities coming from the single market, Mr Hale mentioned that a final consultation is underway on ‘passporting’ across the EU, although he admitted to having no idea how many will take it up.
A spokesperson for the Council of Mortgage Lenders pointed out there are many reasons why a cross-border mortgage market across different member states has been slow to materialise.
“Different systems of property registration and ownership, along with differences in how lenders can enforce their security in the event of default by borrowers, are just as important as the system of mortgage regulation itself.
“National markets tend to have their own characteristics and idiosyncracies, and the Mortgage Credit Directive therefore only goes so far towards harmonising these. We do not see differences in mortgage regulation as the major reason why cross-border lending has failed to gain traction in the past.”
