Increased competition is good for the consumer
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A few months ago I wrote about plans of the EU to integrate the mortgage markets throughout the Union and thereby allow a measure of cross-border lending which has been unavailable so far. This, it was hoping, would increase competition and allow customers to take advantage of currency fluctuations to save money on their home loans.
However, the Council of Mortgage Lenders (CML) has today issued a press release calling on the EU to halt plans for the integration, saying that conditions have changed so much in the months since the White Paper was prepared and published in December last year that it would make no sense to proceed.
Instead, the CML urges the Commission to focus its efforts for the time being on work to support financial stability. New mortgage market proposals should only be developed following a detailed analysis of the economic and mortgage market changes that are emerging.
A spokesman said, ‘European mortgage markets have changed so dramatically in recent months that the only sensible step at this stage is to drop the proposals and start again from a basis of analysing likely future market conditions.’
‘Proposals to further the integration of markets are unlikely to produce net benefits in the present climate. We believe that the Commission itself recognises this, and will not bring forward proposals in the immediate future. They have also launched a broad programme of work on financial stability, which is a sensible and timely development.’
There seems to be at least a grain of truth in this. After all, Northern Rock and the Credit Crunch have left us with quite a deep financial crisis that is terrorising homeowners and shaking the Government.
However, the statement by the CML is utter rubbish. The CML represents banks and building societies, in other the very people likely to lose from the proposed integration. More competition means that they will have to work harder to earn their profits.
Similarly, the integration plans would mean that if the domestic interest rates here in the UK were too high for borrowers they could chose to borrow in the Euro zone or even in other non-Euro zone members of the EU.
The plea from the CML that the EU’s plans be shelved are in fact nothing more than a cynical ploy. The credit crunch has become a catch all excuse for companies to blame when something doesn’t go their way. This is even worse in this situation because the credit crunch may have been less likely had the changes been implemented sooner. More competition means better deals for the customers and lower profits for the companies and that is what the CML is trying to stop.
