SBP: European Commission mulls liberalised mortgage market

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EU paper proposes making it easier for consumers to get a mortgage, and other banking products, in other EU countries.

Workable?

This would be fine but is only aspirational.
What is needed to make this work is that the same legal frame work in relation to repossessions is put in place as they have in the countries that have the low mortgages.
As a country we see repossessions as something that should not be happening. We also have the same mentality about Landlords.
I accept that in a majority of cases that there is a hard luck story behind a repossession but a lot of genuine people with mortgages and looking for mortgages are paying a high price for the current repossession system as it currently exists.
Whether we like it or not banks need to be profitable long term in order for them to lend.
We need a change in the repossession system as well to encourage other financial institutions to enter the market to make it more competitive rather than exiting it.
The market will not become very competitive until we change the current repossession system and that will be a price current and future mortgage holders will have to pay for the current nonsense.

There is nothing to stop any credit institution authorised in another EU member state from offering mortgages in Ireland today.

Dermot has accurately described the key reason why we have not seen any new entrants to our mortgage market, notwithstanding the current high margins. High unresolved default levels necessarily mean high mortgage rates.

I will be discussing this on Sean O'Rourke just after 11 am this morning.

Brendan

I just listened to the audio file.

Brian Hayes said:
Pan European credit worthiness body required.
EC wants single mortgage market. At green paper stage.
Language barrier might be dealt with by intermediaries.

Brendan said the idea of a single market was a theoretical idea but not practically workable.

The language barrier!

We have had a single market in banking since the early 90s. Currently Rabo, Danske and Volkswagen Bank, to name three, operate in Ireland as branches of credit institutions authorised in other EU member states.

One key problem is that any new entrants to our mortgage market would have to set their loss provisions for new home loans in Ireland on the basis of the incumbents' (horrendous) loss experiences. The idea that a German bank, for example, could write mortgages here on the basis of German loss experience is misplaced.

Also, would a German bank be willing to put up with MARP, an under-resourced court system and political threats to introduce price-fixing in the mortgage market?

The ongoing failure to deal conclusively with non-performing home loans will impact lending costs in Ireland for a very long time to come.

I do not see many European banks wanting to get involved in the Irish mortgage market at all? Most profitable European banks keep a very small mortgage portfolio even in their home country and the large institutional shareholders frown on banks who hold large portfolios! DB is in the process of trying to dispose of it's interest in the German market (valued an €146b) for two reasons it is unprofitable in comparison to the traditional banking businesses of asset management & investment banking and because their shareholders have indicated that they should. In fact at least three of their major institutional shareholders have indicated that they should divest themselves of their entire retail division! For most of the major European banks retail banking is not a very profitable business and the less of it you do the more profitable you are.

Even in an area such as Basel where a large percentage of the work force lives in Germany or France, you will be hard pressed to find even a single bank willing to consider doing a cross border mortgage. In this case the legal structure is very similar as the law in all three is based on civil law and the Napoleonic codes, language is not an issue and most workers are high income earners as the are based at the HQ of large MNCs.