Talks on code for mortgages get more time

Date: 04/06/1998

By Chris Johnstone

MORTGAGE lenders and consumers are being offered extra time to work out what a code of conduct for the industry should look like.

The European Commission has said it is prepared to extend the original June deadline for reaching a voluntary agreement as long as progress is being made.

The Commission wants such a code to make it easier for borrowers to shop around for the best deal and to pave the way for a single European market in mortgages to evolve alongside the introduction of the euro.

Progress could amount to a draft code from the industry and a response from consumers suggesting that a compromise could be hammered out.

However, the two sides are still far apart and key questions, such as the sanctions to be applied if companies break the code, have yet to be addressed.

The European Mortgage Federation, whose members provide around 75% of EU housing loans, is leading industry attempts to find a solution.

It has fixed on a British code of conduct for mortgage lenders as the model for a Europe-wide measure. However, consumers are understood to have many reservations about the industry's draft proposals, with more talks due this month.

The mortgage industry and the European consumer organisation BEUC are trying to find common ground between what were initially widely different views.

Consumers would have preferred the Commission to have come forward with a directive setting out minimum rights for borrowers. They point to the existence of similar laws already covering the area of consumer credit.

But mortgage lenders argue that the comparison is not valid. Home loans involve much more money than consumer loans, are more complex, usually entail legal advice and are not given over the counter.

However, even if agreement on a code can be reached, other obstacles to the creation of a genuine single market in mortgages will remain, with experts citing the problems faced by borrowers with foreign mortgages in claiming national tax advantages as the biggest stumbling block.