On Friday my Google Alerts pinged into action to notify me of a story from Brussels that I ought to pay attention to and perhaps even write about. Yet, having searched the websites of European Voice, EurActiv and EUObserver, I didn’t find a dickie-bird. Therefore, it is to this story in the Times of Malta that I refer…
It seems as though early ideas are in place to open up the mortgage markets of Member States to providers from other countries. I know that it can, will and must come to the mortgage market at some point, but honestly,
IS NOW REALLY THE RIGHT TIME?
The world (and Europe) is still struggling to cope with the impact of banks taking on mortgage risks that they clearly did not fully understand, many of which originated in another country. Governments are in dire financial straits for a multitude of reasons, including propping up multinational banks that are based in their countries.
These banks had international subsidiaries, international loans and investments and international shareholders. Look where it got us!
Is now really the time to look into ways to internationalise the client bases of each subsidiary? Isn’t this mess complicated enough without adding another layer of complexity to the next meltdown, whenever that may be?
Forgive my scepticism dear reader, but having worked in a UK mortgage lender for 6 (very long) years at the start of my working life, I can say with very little room for doubt that the average mortgage lender is simply not equipped to deal with the complexities that this could create. For example, can you imagine a UK bank (for it would be UK banks that rushed into this headlong) trying to reclaim money owed to them by (lets just say…) a Hungarian borrower?
Mayhem. Complete multi-lingual, multi-cultural, multi-legal system mayhem.
And, if the borrowers happened to use a different currency for their borrowings than their income, as many would surely do, there could be millions of people taking on currency risks with the largest purchase of their lives. Worse still, they probably would not even realise that they had done this until rates moved against them, as they certainly would at some point during a 25 year contract.
I recall reading about this problem a few years ago, where many Poles had borrowed in Swiss francs – I forget why and cannot find a link (apologies). These unfortunate folk suddenly found themselves in real financial trouble when exchange rates moved against them. Is that really what we want to see?
Regular readers will know that I often find seemingly plausible ideas ridiculous. I have even waited a few days to write this in the hope that my blood pressure will cool, but in the current climate, this is right up there with the worst of them.financialguy