European Mortgage Market: An Overview 1992-2003

Abstract

The development of the European mortgage market, its current situation in terms of volume, growth, prices, interest rates and new products, and an analysis of mortgage integration are the focus of this paper. The recent creation of the European Mortgage Finance Agency (EMFA), as an attempt to build a single European securitization market, is an important step toward integration within the wider goal of EU financial integration. Obstacles to integration, potential members of the EMFA, and its main goals and advantages are discussed in the forward-looking section of this paper. In addition, the paper deals with three important aspects of the EU mortgage market, taken as a whole: 1) How it operates. Other aspects considered include transaction costs, transparency requirements affecting credit institutions (European Code of Conduct), and a classification of mortgage products on the market. 2) Refinancing in Europe (as compared to the USA). The secondary market for the funding of financial institutions, in relation to mortgage bonds and mortgage-backed securities, including explanations of their main characteristics and the differences between them. 3) How European mortgage markets influence the economy and how they may affect private investment and consumption, household debt (which continues to increase each year), and the performance of financial institutions (high competitiveness) are other important points considered. The development of the European mortgage market, its current situation in terms of volume, growth, prices, interest rates and new products, and an analysis of mortgage integration are the focus of this paper. The recent creation of the European Mortgage Finance Agency (EMFA), as an attempt to build a single European securitization market, is an important step toward integration within the wider goal of EU financial integration. Obstacles to integration, potential members of the EMFA, and its main goals and advantages are discussed in the forward-looking section of this paper. In addition, the paper deals with three important aspects of the EU mortgage market, taken as a whole: 1) How it operates. Other aspects considered include transaction costs, transparency requirements affecting credit institutions (European Code of Conduct), and a classification of mortgage products on the market. 2) Refinancing in Europe (as compared to the USA). The secondary market for the funding of financial institutions, in relation to mortgage bonds and mortgage-backed securities, including explanations of their main characteristics and the differences between them. 3) How European mortgage markets influence the economy and how they may affect private investment and consumption, household debt (which continues to increase each year), and the performance of financial institutions (high competitiveness) are other important points considered.

Keywords: European mortgage market integration, European mortgage market, Mortgage loans outstanding, Mortgages as a percentage of GDP, Growth, Interest rate applied, Transaction costs