The European Commission has unveiled plans to create more integration in the European mortgage market, but maintains the threat of legislation if member states fail to take concrete action.

Under the plans, spearheaded by internal market commissioner Charlie McCreevy, consumers would look ideally beyond the domestic market to get mortgages from another member state.

Even though consumers tend to choose their lenders according to language, distance or lender business strategies, the commission believes that careful policy-making results in lower costs and a better choice of services.

According to its figures, integrated mortgage markets could lower the interest payable on a €100,000 mortgage loan by up to €470 a year.

In addition, a study carried out in 2005 by London Economics for the commission estimated that the value to the EU economy of more harmonisation in the mortgage market over the next 10 years would come to about €94.6 billion, or 0.89 per cent of 2005 EU Gross Domestic Product.

The commission says it is aiming to make it easier for consumers to change mortgage lenders, have better protection and more services.

As part of its plans, it is urging member states to tackle early repayment rules which vary strongly across the 27 member states.

The commission's proposals, which offer an indication of where it would like policy to go, come after what has been a turbulent few months in global credit markets, prompted by the subprime mortgage crisis in the US which came to a head over the summer.

Brussels said it has drawn the "initial lessons" on from the crisis, but it refrained from announcing legislation following opposition from both Germany and Britain, who fear it would just mean more paper work.

The commission will use the coming year to assess the need for legislation and, in the meantime, it will try to persuade member states to adopt its vision for the market.