Convergence in European mortgage systems before and after EMU

Stephens, M. (2000) Convergence in European mortgage systems before and after EMU. Journal of Housing and the Built Environment, 15(1), pp. 29-52. (doi: 10.1023/A:1010194725136)

Abstract

The European Union's mortgage finance systemsremain diverse, despite the introduction of theEuropean Single Market. However, 11 of the 15members of the European Union have now enteredthe Economic and Monetary Union (EMU). In this article athree-part typology of convergence is created andlinked to two meanings of efficiency. The typology isused to assess the impact of EMU on mortgage systemconvergence. It is suggested that the single currencywill help to shift European mortgage markets fromtheir currently diverse positions, with a variety ofintermediation systems, mortgage products and prices,towards an intermediate position of financialintegration (`financially competitive convergence')whereby the risk and option-adjusted prices ofmortgages will be similar, although institutions andmortgage products will continue to vary. This will beachieved through two mechanisms: first the muchgreater transparency of pricing of mortgages, andsecond by making retail savings markets morecompetitive. However, convergence will also beinhibited by the continued privileged availability ofcheap funds to some intermediaries. Even if thisbarrier were removed, non-financial features ofmortgage systems, such as legal frameworks, willprevent the development of a fully integrated marketwith a standard pan-European mortgage product.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Stephens, Professor Mark
• Authors: Stephens, M.
• College/School: College of Social Sciences > School of Social and Political Sciences > Urban Studies
• Journal Name: Journal of Housing and the Built Environment
• Publisher: Springer Netherlands
• ISSN: 1566-4910
• ISSN (Online): 1573-7772