Economy becomes top worry for EU mortgage lenders

By Huw Jones

BRUSSELS (Reuters) - There is no end in sight to problems in Europe's 6 trillion euro (£5 trillion) home loans market but countries with conservative lending policies are riding the storm relatively well, top industry officials said on Thursday.

Big booms in housing markets in European Union states like Britain, Ireland and Spain have burst spectacularly but Germany, the Netherlands, Belgium and Denmark are relatively stable.

After 10 years of growth, Europe's mortgage market has slowed as the worst financial turmoil in 80 years has begun making loans harder to come by.

But recession in the euro zone and Britain is now becoming a bigger dampener on the market and more interest rate cuts would help stabilise the situation, officials said.

Michael Coogan, director general of Britain's Council of Mortgage Lenders said third quarter figures due out on Friday will show arrears on UK home loans were the worst this century.

"We may well be facing transaction numbers across the UK at the lowest level since World War Two. The turmoil will continue for much of the next 12 months," Coogan told a European Mortgage Federation conference.

Coogan said that in the last quarter in Britain demand for loans was shrinking faster than supply due to economic slowdown.

Other officials were equally gloomy.