eu mortgage markets market trends & regulatory developments european mortgage federation

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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

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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.

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Market TrendsMarket Trends

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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)

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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


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


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


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

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House Price Growth- 2004 House Price Growth- 2004 and 2005and 2005


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

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Housing Completions/1000 Housing Completions/1000 Inhabitants-2005Inhabitants-2005


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

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Mortgage bonds as a % of Mortgage bonds as a % of residential lending outstandingresidential lending outstanding


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%

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Green Paper follow-upGreen Paper follow-up

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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.

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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.

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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.

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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.

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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.

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Upcoming White PaperUpcoming White Paper

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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

eu mortgage markets market trends & regulatory developments european mortgage federation

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