'Euromortgage' plan for borrowers

The UK mortgage market is very competitive

Homebuyers could be able to shop across Europe for the best mortgage deal, under plans being considered by the European Commission.

Brussels is looking at whether a euromortgage - a common mortgage deed - could be developed to get over legal barriers to cross-border home loans.

The euromortgage could allow UK consumers to take advantage of cheaper mortgage rates on the continent.

But a mortgage expert said the UK market already served borrowers well.

More cross-border activity and competition in the EU mortgage market could increase choice, reduce costs and leave more money in people's pockets Charlie McCreevy, EU Single Market Commissioner

Cost reduction

Only 1% of Europeans - mostly second homeowners or people living in border regions - take out a mortgage for a home from another European country.

Charlie McCreevy, EU Single Market Commissioner, launching a consultation green paper on the mortgage market, said that more cross-border activity could benefit consumers.

"A home is the biggest purchase most people make in their lifetime and the mortgage credit markets are a very significant part of the EU economy," Mr McCreevy said.

"More cross-border activity and competition in the EU mortgage market could increase choice, reduce costs and leave more money in people's pockets."

Language, legal barriers, fluctuating exchange rates and different rules on early repayment are all seen as significant barriers to a single mortgage market.

The creation of a euromortgage could help overcome some of these difficulties, the Commissioner said.

UK 'most competitive'

The mortgage industry has until December to respond to the green paper.

But one leading UK mortgage expert cast doubt on whether UK consumers would benefit from taking out mortgages with lenders based in other EU countries.

"The UK mortgage market is far and away the most competitive in Europe," said Ray Boulger, technical director at mortgage adviser John Charcol.

"As a result, Britons benefit from some of the cheapest mortgage rates in Europe, despite the higher base lending rate."

The European Central Bank interest rate is 2%, compared with the Bank of England base rate of 4.75%.