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CML warns Europe against mortgage regulation

The Council of Mortgage Lenders has warned the European Commission to concentrate on macro-economic policies rather than retail mortgage regulation.

The council, which has published its response to the Commission’s consultation on responsible lending, warns that Europe may inflict “harmful, unintended consequences” on the UK economy if it conflicts with any of the proposals being drafted by the FSA at the end of this month.

It is concerned that European powers may force mortgage lenders to adopt product regulation, such as loan to value and loan to income caps.

It says: “The UK mortgage market remains the largest in Europe, so there is a strong case for the Commission to allow the UK review to run its course, and to take into account any conclusions emerging from it before publishing its own proposals for lending in Europe.”

The CML says it is particularly concerned that UK lenders could potentially be confronted with conflicting regulatory requirements and extra costs if the FSA and the Commission undertake their reviews at the same time and come up with conclusions that do not complement each other.

It has also questioned the need for continental-wide mortgage regulation due to the fact that banks will have little desire for cross-border lending in the foreseeable future thanks to the recession. It says: “Measures to promote a single market are unlikely to produce any net benefits at this stage.”

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