Transcript Executive Committee Meeting 28th November 2002

EU Mortgage Markets
Market trends &
regulatory developments
European Mortgage Federation
Matthias Tiemer
Amsterdam, 13 March 2007
1
The Voice of the EU Mortgage
Industry
 Founded in 1967, the European Mortgage
Federation (EMF) is the Voice of the Mortgage
Industry at EU level;
 Groups together both national associations
and individual lenders from EU27;
 Together its members grant approx. 75% of
residential & commercial mortgage loans in
Europe;
 Total value of outstanding residential
mortgage loans was EUR 5.1 trillion at end
2005, which amounts to 47.5% of EU GDP.
2
Market Trends
3
Value of EU Residential Mortgage
Market 1996-2005
6,000,000
16%
14%
5,000,000
12%
4,000,000
€ million
10%
3,000,000
8%
6%
2,000,000
4%
1,000,000
2%
 Growth rate in 2005
was 11%, over the
average growth rate
over the past 5 years
(8.5%)
 Market has more than
doubled in size over
past 10 years (from
2.3 trillion in 1996 to
5.1 trillion in 2005)
0%
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
0
 €5.1 trillion in debt
outstanding as at end
2005
EU 25
% change
Source: European Mortgage Federation
4
Outstanding Mortgage Loans in
the EU 25 in 2005
UK
 The UK has the EU’s
largest mortgage market
in the EU with € 1,4
trillion outstanding. It
overtook DE in 2004.
Germany
France
Netherlands
Spain
Italy
 Together DE and the UK
represent 50% of the
market
Denmark
Sweden
Ireland
 New Member States have
the smallest markets but
they are growing very
quickly
Belgium
Portugal
Finland
Austria
Greece
Poland
0
500,000
1,000,000
Source: European Mortgage Federation
1,500,000
5
Mortgage Debt as % of GDP - 2005
Netherlands
 European average around
47.5% of mortgage debt
to GDP. It increased from
44.5% in 2004.
Denmark
UK
Sweden
Ireland
Portugal
Germany
Spain
 New Member States
average is only around
8% of mortgage debt to
GDP (It increased from
approx. 5% in 2004).
EU 25
Finland
Luxembourg
Belgium
Malta
France
Greece
Austria
 Highest debt to GDP ratio
is in the Netherlands
(97%) and lowest in
Slovenia (1.4%).
Cyprus
Estonia
Italy
Latvia
Hungary
Czech Republic
Lithuania
Poland
Slovakia
Slovenia
0%
20%
40%
60%
80%
Source: European Mortgage Federation
100%
6
Mortgage Markets’ Growth in
2005
Latvia
Lithuania
 In the EU 25 the
fastest growing
mortgage markets are
in CEECs; the fastest
are in the Baltic
countries.
Estonia
Czech Republic
Slovenia
Poland
Cyprus
Slovakia
Greece
Ireland
Spain
Malta
Hungary
 The fastest growing
markets in the EU 15
are Greece, Ireland
and Spain.
Italy
France
Luxembourg
Finland
Denmark
Belgium
Netherlands
 Germany is still
experiencing very low
mortgage market
growth (0.4%).
Austria
Portugal
EU
UK
Sweden
Germany
0%
20%
40%
60%
Source: European Mortgage Federation
80%
100%
7
House Price Growth- 2004
and 2005
Latvia
Estonia
Denmark

The Baltic States
recorded the highest
house price growth rates
in 2005.

However, in 2005 a
slowdown has become
visible in some countries,
including Malta, Spain,
France and the UK
Belgium
Luxembourg
France
Spain
Slovenia
Ireland
Malta
Sweden
Euro-zone
(however end 2005 and 2006
prices picked up again in the
UK).
Greece
Finland
UK

Austria
Portugal
Germany
-0.10
0.00
0.10
0.20
2004
0.30
0.40
0.50
In 2006 lower house
price inflation is also
evident in Denmark and
in the Nordic countries.
2005
Source: European Mortgage Federation
8
Housing Completions/1000
Inhabitants-2005
Ireland
Cyprus
Spain

In Ireland (19.7), Cyprus
(14.4) and Spain (12.2)
housing completions/1000
inhabitants are the highest
in the EU.

The countries with lowest
housing completions are
the new Member States.
They are slightly above or
below 2 per 1000
inhabitants.

Private developers in these
countries tend to target
wealthier households or
commercial construction.
Finland
Portugal
EU
Denmark
Hungary
Netherlands
UK
Czech Republic
Slovenia
Poland
Germany
Estonia
Slovakia
Sweden
Lithuania
Latvia
0
5
10
15
Source: European Mortgage Federation
20
25
9
Mortgage bonds as a % of
residential lending outstanding
Denmark
EU 17.5%

In Denmark most mortgage
loans are funded by the
issuance of covered bonds
(≥ 90%).

Hungary and Czech Republic
are the only new Member
States issuing substantial
volume of mortgage bonds.

In Spain the market is
growing at a sustained pace
and mortgage bonds are
assuming increasingly
importance as a funding
instrument.

Mortgage bonds markets
vary greatly across Europe,
in the same way as do
primary mortgage markets.
Czech Republic
Sweden
Hungary
Spain
Germany
Switzerland
Austria
France
Ireland
Poland
Finland
UK
Latvia
Lithuania
0%
20%
40%
60%
80%
100%
Source: European Mortgage Federation
10
Green Paper follow-up
11
Chronology – The story so far
 Dec ‘04: Forum Group Mortgage Credit Rep
 June ‘05: COM Green Paper Mortgage Credit
 Nov ’05: EMF Position on Green Paper
 Dec ‘05: Public hearing on Mortgage Credit
 Nov ’06: European Parliament Own Initiative Report
 Dec ‘06: Mortgage Funding Expert Group (MFEG) Report
 Jan ’07: Mortgage Industry & Consumer Dialogue Group
(MICDG) Report
 Jan/Feb ’07: EMF Positions on MICDG & on MFEG Rep
 June ‘07: Expected publication of COM White Paper on
Mortgage Credit
12
MFEG Report (1) – Primary Market Issues


Early repayment (ERP; issue addressed by MFEG &
MICDG):
 MFEG Rep makes link between retail & funding side;
 Rep clearly shows ERP has a cost & MFEG believe lender
must be compensated for all losses incurred with no caps;
 Majority of MFEG in favour of ERP being a contractual
option, a position initially put forward by the Industry;
 Consumers want legal right & cap on indemnity (MICDG).
Property valuation:
 MFEG endorse EMF Recomm. & EMF would welcome COM
Recomm. to achieve convergence in specific areas;
 EMF furthermore supports mutual recognition of national
valuation methodologies (complemented by application of
European or internationally-recognised standards);
 MFEG Rep highlights importance of consistent property
valuation & LTV ratios in context of CRD.
13
MFEG Report (2) – Primary Market Issues


Land registration:

Need for security: Rep calls for discontinuation of hidden
overriding preferences/mortgages;

Calls for cross-border equal access to land registers;

MFEG Recomm. reflect EMF ones in this respect;

EULIS’ important & innovative work to be recalled here.
Foreclosure:

Vital for security of lender & value of collateral;

MFEG recommends EU scoreboard & setting of max target
for duration;

EMF very supportive of presentation – in parallel to its own
recomm. & scoreboard covering 14 EU Member States – of
official COM scoreboard providing info for EU27.
14
MFEG Report (3)
 Secondary Market Issues:

Covered Bonds, RMBS, Temporary Loans,
Whole Loan Sales: MFEG request for
improved transferability of collateral,
transparency & legal framework;

EMF supportive of MFEG’s recommendation
that Member States that do not as yet have
CB legislation consider introducing one.
 Investor Issues: Request for improved
availability of data & reporting;
standardisation of definitions & transparency.
15
Credit intermediaries




MFEG Recomm. on alternative distribution channels: MFEG
expressly supports COM’s intention to undertake a study on
credit intermediaries – as announced by COM in its Dec 2005
White Paper on Financial Services Policy (2005-2010).
Distribution:
 Key element in mortgage value chain;
 Increasingly important: Indirect distribution via credit
intermediaries or brokers; vs. repres. offices/branches;
Intermediaries currently dealt with in:
 Insurance Mediation Directive; and
 2005 COM Proposal for Dir on Credit for Consumers.
In context of mortgage credit:
 Forum Group Rep & GP Mortgage Credit highlighted role &
importance of credit intermediaries;
 European Parliament also recognised beneficial role of
credit intermediaries in its Nov 2006 Report.
16
MICDG Report (1)
 Content of pre-contractual info/Code of Conduct:
Industry willing – in principle – to adapt Code’s content:

Risk warnings & foreign currency loans (& Equity
Release?);

Provided: Evidence of consumer benefit;

And: No information overload.
 Timing for handing over pre-contractual info:

«Conceptual definition» for handing over of ESIS;

«Sufficient time to compare offers»: Split views.
 Industry interested in continuing exchange with
consumers.
17
MICDG Report (2)
 Advice:
 Industry opposed to duty to advise; Consumers in
favour;
 Advice according to Industry: different, tailor-made
service to be requested and paid for separately by
borrower.
 Early repayment: See above
 Annual Percentage Rate of Charge (APRC):
 Industry supports single harmonised APRC for
mortgage credit to provide consumers with an
adequate tool to compare offers;
 Only those costs levied by the lender for the loan for
his benefit to be included (i.e. narrow APRC);
 Consumers: All inclusive APRC.
18
Upcoming White Paper
19
White Paper:Possible content
 Basis for COM drafting White Paper:

Outcome Green Paper consultation;

European Parliament Own Initiative Report;

MFEG & MICDG Reports & outcome of consultation
on these reports;

Internal COM impact assessment.
 COM always said: « Policy mix »
 Decision as to status & adjustment of content of Code
 Infrastructural issues: Valuation; Land registries;
Hidden preferences/mortgages; Foreclosure; Credit
intermediaries.
20
EMF Position on Integration
 EMF playing prominent role in this consultation;
 EMF in favour of further integration provided benefits for
consumers & Industry alike;
 Any potential measure to be submitted to impact
assessment to evidence its resulting in direct benefits
outweighing the costs (better regulation principle);
 Obstacles deterring lenders from going cross-border
should be addressed first as evidence tends to show
that cross-border activity depends on lenders going
abroad;
 Industry remains committed to the Code of Conduct,
which it believes is an adequate tool for consumer
information and which should be implemented in all
Member States.
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Thank you
Contact details:
European Mortgage Federation
Matthias Tiemer
Av. de la Joyeuse Entrée 14/2
B – 1040 Brussels
Email: [email protected]
Web: www.hypo.org
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