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A consortium of leading banks is today calling on the European Union to back a pan-European mortgage market - holding out the prospect of cheaper mortgages.
The plan for a European Mortgage Finance Agency - modelled on the Fannie Mae agency in the US - is supported by UK bank Northern Rock, along with two of Europe's leading mortgage lenders, France's Crédit Agricole and Spain's BBVA.
The private sector initiative would see the agency sponsored by the EU, and able to borrow money on the capital markets at a lower interest rate than individual financial institutions. Through member banks it would offer cheaper, long-term, fixed-rate mortgages to consumers throughout the EU.
"The creation of a secondary mortgage market, through a Fannie Mae type of agency, would allow European consumers to unlock the huge store of wealth in real estate currently going unclaimed," said Danny Gabay, an economist for Fathom Consulting.
"At the same time, consumers would be cushioned from higher rates, as their mortgages would be fixed."
Rob Thomas, general manager of the Emfa project team, said the new agency would not require any taxpayers' money. "[The] Emfa would enable lenders to provide their existing mortgage products at better prices and introduce long-term, fixed-rate mortgages without redemption penalties."
The Fannie Mae agency, founded by New Deal Democrats in 1938 and listed on the stock market in 1968, is chartered by the federal government and is the US's largest housing lender.
Together with rival agency Freddie Mac, which was set up in 1970 but recently became the subject of one of America's many accounting scandals, it provides a deep pool of financing for mortgage lenders.
Because the US agencies provide home loans at between a quarter and two-fifths of a point less than market rates, Mr Thomas estimates that the proposed European body could offer borrowers a saving of up to £1,000 a year on a £250,000 mortgage.
Like its US counterparts, the Emfa would be able to offer loans to occupants of social housing and disadvantaged people throughout Europe.
Supporters of the single European mortgage market say it would enhance integration between EU economies, and improve the efficiency of the region's mortgage industry.
"It establishes a unified secondary mortgage market across the EU, allowing lenders in each country to access the same funding source on the same terms," Mr Thomas said.
The project team is in discussions with a leading British retail bank, while Ireland's largest mortgage lender, Irish Life Permanent, is already backing the scheme.
The agency could face resistance from British mortgage lenders unwilling to encourage further competition within a lucrative market. But, in the long run, the project would allow British institutions access to 300m potential customers across Europe.
"This would certainly make it easier for lenders to start selling mortgages in other countries," Mr Thomas said. "But the competitive position among lenders in each country is unlikely to change in the short term."
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