Bernard Durkan (Kildare North, Fine Gael)

I thank the Whips and the Government for facilitating this debate. This report is one of four that the Oireachtas Joint Committee on European Affairs has produced in the current year. Given the importance of being at the coalface of discussions of European-related issues, the committee felt this was an area in which it had a worthwhile submission to make.

The White Paper on Integration of EU Mortgage Credit Markets summarises the conclusions of a comprehensive review of the functioning and the level of integration of EU mortgage credit markets. It presents a package of measures to improve the efficiency and competitiveness of EU residential mortgage markets. The Commission believes that EU action is warranted in this area and that the treaty provides the basis for the creation of a single market. Evidence shows that the single market for residential mortgages is far from integrated. Obstacles exist that restrict the level of cross-border activity on the supply and demand sides, thus reducing competition and choice in the market.

The Commission recognises that consumers predominantly shop locally for mortgage credit and that the majority will probably continue to do so for the foreseeable future. The integration of EU mortgage markets will therefore be essentially supply-driven, in particular through various forms of establishment in the member state of the consumer. The Commission has also duly taken account of the lessons that can already be drawn from the recent events in financial markets. However, this White Paper is not as such a response to the current financial turmoil that originated from problems in the US sub-prime market.

When the committee first debated this issue in July, the full extent of the mortgage and financial services turmoil that we now see had not emerged. However, the committee is charged with the responsibility of ensuring that we in the Houses of the Oireachtas have an input into what the EU institutions propose. We were invited by the Commission to make a submission, which we did. The objectives of the White Paper are to facilitate the cross-border supply and funding of mortgage credit, increase product diversity, improve consumer confidence and facilitate customer mobility.

I wish to thank the Commission for its invitation to national parliaments to submit their views and comments on Commission proposals received under the Barroso initiative, including Green and White Papers. As part of this welcome initiative, the committee has considered in great detail the Commission's White Paper on the Integration of EU Mortgage Credit Markets. As part of this consideration, the committee invited and received submissions from the key stakeholders in the Irish mortgage market, namely the Financial Regulator, the Department of Finance, the Irish Bankers Federation and Financial Services Ireland. The committee also held indepth discussions with these stakeholders at two of its public meetings on 23 July and 29 July 2008. The committee would like to thank these groups for their co-operation and worthwhile inputs.

The committee supports the White Paper's objective to further enhance the competitiveness and efficiency of the residential mortgage market in Europe by facilitating market integration. The committee agrees that the integration of the retail mortgage markets will be supply driven as consumers predominantly shop locally for mortgage credit. In this context, the committee underlines the vital importance that any further actions in this area, whether legislative or otherwise, should be consumer focused. It does not agree with integrating mortgage markets for the sake of achieving a pure internal market. Any future measures proposed in this area on foot of the White Paper must demonstrate clear and tangible benefits to European consumers. This is further underlined by the recent financial turmoil brought about by the credit crunch and, some would argue, irresponsible lending by financial institutions. A great deal of debate time during the committee's perusal of this document was taken up with what the committee members regarded as irresponsible lending and the possible consequences for the consumer. Not only were there consequences, as there now appears, for the consumer, but there were also consequences for the banking system and the lending agencies in general.

The committee makes the following specific comments which it would ask the Commission to take into account in its further work on the White Paper. Any proposed measures aimed at integrating Europe's retail mortgage markets must have at their core consumer protection. The committee welcomes, therefore, the White Paper's proposals on enhancing the rights of consumers such as better and more comparable pre-contractual information, improved access to credit data and a ban on product tying and restrictive practices.

The White Paper singles out early repayment as one of the most important issues for integrating EU mortgage markets. Irish law at present gives some consumers considerable rights when they want to pay off their loans early. The committee is anxious that these rights are not diminished in any way by EU proposals. Any effort at harmonisation should not undermine the Irish consumers' advantages in this area.

The committee welcomes the White Paper's call for member states to improve the efficiency of land registration procedures. The committee supports calls that land registers be available on-line and would welcome a move to e-conveyancing in Ireland which would lead to greater transparency, efficiency, consistency and speed in terms of property transactions. This would benefit consumers both directly in terms of their basic transactions and indirectly through potentially attracting more lenders to the market.

As regards improving the efficiency of forced sales procedures, the committee is concerned that any Commission proposal aimed at shortening or quickening these procedures would have unwelcome consequences for the Irish system. Ireland has one of the slower foreclosure and forced sales procedures in the EU. However, this has the unintended positive effect of encouraging creditors to seek mediation and renegotiation of loans rather than pursuing costly and long drawn out legal procedures. In addition, the difficulty in securing repossession of properties is an incentive for mortgage lenders to consider carefully whether the consumer has the initial capacity to repay a loan, a key practice for responsible lending. The committee spent considerable time discussing this aspect of the market, particularly since members felt that irresponsible lending by financial institutions should not be rewarded by early foreclosure.

The committee believes the current problems in the world economy brought on by the credit crunch and the crisis in the banking sector are due, in part, to irresponsible lending by financial institutions that has left them exposed to unnecessary risk and placed consumers in very vulnerable positions. The committee, therefore, welcomes the White Paper's focus on the issue of responsible lending and recommends that future work on foot of the White Paper should seek to tackle the issue as a matter of urgency.

Recognising that events have moved on significantly since the publication of the White Paper and given the current crisis in the financial markets, and in particular the banking sector, the committee recommends that the Commission re-evaluate the economic benefits of the White Paper's objectives. The committee welcomes that the Commission has entered into extensive consultations with all relevant stakeholders on the issues raised and proposals made by the White Paper. However, given the scale and importance of the mortgage sector to every part of the EU economy and the worldwide economy, a point underlined by the current crisis and its impact on businesses and consumers alike, the committee believes it is vital that any proposals be fully considered, robust impact assessments undertaken and cost-benefit implications rigorously analysed.

It was agreed on 24 September 2008 that this report of the joint committee be laid before the Houses of the Oireachtas, published and put on the Oireachtas website and copies forwarded to the European Commission and the Department of Finance for their consideration and to those who contributed to the exchange of views, the Joint Committee on Finance and Public Service, and all Irish Members of the European Parliament for information. The committee studied the White Paper and gave its views without reservation. Its views were based purely and simply on national and international experiences and particularly the experiences at local level in the present financial and economic environment.

The committee was particularly emphatic in insisting that we, being very much committed to the European project, should have full access to whatever benefits accrue and become available throughout the European Union. It is vital that in any future discussions any opt-outs that we might feel it necessary to indulge in should not become part of a cherry-picking exercise which might ultimately lead to this country being disadvantaged in any aspect of our entitlements under EU law either proposed or existing. I commend the report to the House and welcome the Minister of State at the Department of the Taoiseach with responsibility for European affairs, who is in the House to give his response.

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