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UK and Europe could clash over future of mortgage regulation

The UK's Council of Mortgage Lenders has warned that separate debates by the London based Financial Services Authority and the European Commission following similar timetables creates the risk of conflict.

The FSA is due to issue a discussion paper in September setting out its proposals for the future regulation of mortgages in the UK. In Europe regulators are expected to publish their own proposals for legislative intervention later this year.

The European Commission has made it clear that it no longer accept that markets will deliver the right outcome for consumers without some form of cross border regulatory intervention.

It has been pursuing a comprehensive series of studies and impact assessments of various aspects of the market, including, credit intermediaries, equity release products, tying-in, and its impact of customer mobility, interest rate restrictions, responsible lending and non-credit institutions.

It has also been carrying out a series of cost-benefit analyses of some of the policy options. The outcome of all this work will be distilled into a series of proposals to meet the Commission's timetable for action.

However, the CML warns that hostility towards market failings in the US is a political reality in Europe. 'While clearly there are differences between the UK and US, some of that hostility could spill over to the UK. We saw elements of this in the build-up to the recent G20 summit and the different stances of France and Germany, and the US and UK,' the CML said.

'The Commission and other European institutions appear to acknowledge, however, that markets in the US and Europe are widely different. A key goal therefore, both for us and for the European Mortgage Federation, is to ensure that the Commission continues to acknowledge the diversity of national markets,' it added.

But also points out that the EMF believes that this 'could be challenging in the current climate'.

'There is an opportunity in the coming months to help the Commission strike the right balance between measures that would work on a global or European level and those that would not, and to try to avoid a clash between regulation at a European and national level,' the CML concluded.