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1
EU Mortgage MarketsEU Mortgage Markets
Market trends & Market trends &
regulatory developmentsregulatory developments
European Mortgage FederationEuropean Mortgage Federation
Matthias TiemerMatthias Tiemer
Amsterdam, 13 March 2007Amsterdam, 13 March 2007
2
The Voice of the EU Mortgage The Voice of the EU Mortgage IndustryIndustry
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.
3
Market TrendsMarket Trends
4
Value of EU Residential Mortgage Value of EU Residential Mortgage Market 1996-2005Market 1996-2005
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
€ m
illion
0%
2%
4%
6%
8%
10%
12%
14%
16%
EU 25 % change
Source: European Mortgage Federation
€5.1 trillion in debt outstanding as at end 2005
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)
5
Outstanding Mortgage Loans in Outstanding Mortgage Loans in the EU 25 in 2005the EU 25 in 2005
0 500,000 1,000,000 1,500,000
Poland
Greece
Austria
Finland
Portugal
Belgium
I reland
Sweden
Denmark
I taly
Spain
Netherlands
France
Germany
UK
Source: European Mortgage Federation
The UK has the EU’s largest mortgage market in the EU with € 1,4 trillion outstanding. It overtook DE in 2004.
Together DE and the UK represent 50% of the market
New Member States have the smallest markets but they are growing very quickly
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Mortgage Debt as % of GDP - 2005Mortgage Debt as % of GDP - 2005
0% 20% 40% 60% 80% 100%
Slovenia
Slovakia
Poland
Lithuania
Czech Republic
Hungary
Latvia
I taly
Estonia
Cyprus
Austria
Greece
France
Malta
Belgium
Luxembourg
Finland
EU 25
Spain
Germany
Portugal
I reland
Sweden
UK
Denmark
Netherlands
Source: European Mortgage Federation
European average around 47.5% of mortgage debt to GDP. It increased from 44.5% in 2004.
New Member States average is only around 8% of mortgage debt to GDP (It increased from approx. 5% in 2004).
Highest debt to GDP ratio is in the Netherlands (97%) and lowest in Slovenia (1.4%).
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Mortgage Markets’ Growth in Mortgage Markets’ Growth in 20052005
Source: European Mortgage Federation
In the EU 25 the fastest growing mortgage markets are in CEECs; the fastest are in the Baltic countries.
The fastest growing markets in the EU 15 are Greece, Ireland and Spain.
Germany is still experiencing very low mortgage market growth (0.4%).
0% 20% 40% 60% 80% 100%
Germany
Sweden
UK
EU
Portugal
Austria
Netherlands
Belgium
Denmark
Finland
Luxembourg
France
I taly
Hungary
Malta
Spain
I reland
Greece
Slovakia
Cyprus
Poland
Slovenia
Czech Republic
Estonia
Lithuania
Latvia
8
House Price Growth- 2004 House Price Growth- 2004 and 2005and 2005
Source: European Mortgage Federation
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 (however end 2005 and 2006 prices picked up again in the UK).
In 2006 lower house price inflation is also evident in Denmark and in the Nordic countries.-0.10 0.00 0.10 0.20 0.30 0.40 0.50
Germany
Portugal
Austria
UK
Finland
Greece
Euro-zone
Sweden
Malta
Ireland
Slovenia
Spain
France
Luxembourg
Belgium
Denmark
Estonia
Latvia
2004 2005
9
Housing Completions/1000 Housing Completions/1000 Inhabitants-2005Inhabitants-2005
Source: European Mortgage Federation
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.
0 5 10 15 20 25
Latvia
Lithuania
Sweden
Slovakia
Estonia
Germany
Poland
Slovenia
Czech Republic
UK
Netherlands
Hungary
Denmark
EU
Portugal
Finland
Spain
Cyprus
I reland
10
Mortgage bonds as a % of Mortgage bonds as a % of residential lending outstandingresidential lending outstanding
Source: European Mortgage Federation
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.
0% 20% 40% 60% 80% 100%
Lithuania
Latvia
UK
Finland
Poland
Ireland
France
Austria
Switzerland
Germany
Spain
Hungary
Sweden
Czech Republic
Denmark
EU 17.5%
11
Green Paper follow-upGreen Paper follow-up
12
Chronology – The story so farChronology – 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
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MFEG Report (1) – Primary Market IssuesMFEG 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.
14
MFEG Report (2) – Primary Market IssuesMFEG 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.
15
MFEG Report (3) 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.
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Credit intermediariesCredit 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.
17
MICDG Report (1)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.
18
MICDG Report (2)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.
19
Upcoming White PaperUpcoming White Paper
20
White Paper:Possible contentWhite 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.
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EMF Position on IntegrationEMF 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 youThank you
Contact details:Contact details:
European Mortgage FederationEuropean Mortgage Federation
Matthias TiemerMatthias Tiemer
Av. de la Joyeuse Entrée 14/2Av. de la Joyeuse Entrée 14/2
B – 1040 BrusselsB – 1040 Brussels
Email: Email: [email protected]
Web: Web: www.hypo.org