At the center of the debate are 48 recommendations from the European Commission (EC) on mortages that cross EU borders, which all member states must comment on.

"The unification is primarily designed to make it easier for EU citizens to ask for a mortgage in an EU state other than their home country in order to buy real estate there," said Tomáš Prouza, deputy finance minister.

In line with the EU rules, citizens are entitled to get a mortgage and buy real estate in any member state. However, in reality, individual country laws regulating the mortgage business — including land and property registries and collateral law — are so diversified that they make it difficult for people to get mortgages outside their home countries.

"It is legal but there are no rules," Prouza said.

Conflict of law

The EC's initiative is primarily designed to eliminate a conflict of laws that emerges during a cross-border lending transaction and to increase consumer confidence.

Cross-border borrowers and lenders currently may face three conflicting jurisdictions, including the jurisdiction of the home country of the lender, the laws of the country where the property is situated and the jurisdiction of the client's home country.

A discussion in the EC's Mortgage Forum Group revealed that experts have conflicting views concerning which law applies in a cross-border transaction.

Some industry representatives are convinced the only way to eliminate the confusion is to adopt a mutual recognition rule that would submit cross-border contracts to the mortgage jurisdiction of the place where the mortgage is obtained.

Others counter that mutual recognition in mortgage lending will hamper competition, run counter to modern market trends and hurt consumer confidence. Czech banks also seem to disagree on mortgage market integration.

"We accept the initiative as a certain obligation within the European Union," said David Sahula, Hypoteční banka's spokesman. "This is an inevitable evil."

Sahula stressed that the mortgage market is a local business all over the world. "The number of cross-border lending contracts is negligible," he said.

According to the Czech Banking Association, mortgages provided to EU citizens who are not residents of the Czech Republic account for about 10 percent of all mortgages in the country.

Other bankers, however, voiced a different opinion claiming that Czech mortgage lending re-introduced in the mid-'90s was modeled after EU member mortgage laws and further integration would benefit the market.

"The idea of European mortgage market integration is beneficial and should be developed," said Petra Jarošová, of Raiffeisenbank's press department. "However, [integration] should not rule out competition."

Recently, the Czech Banking Association formed a special commission to discuss the issue, and though it supports the majority of the EC's suggestions, deputy chair of the commission František Pavelka says the group does not consider integration crucial for development of the country's mortgage market.

"We are trying to get involved in the harmonization mainly in order to create equal conditions for mortgage lending," Pavelka said, adding that a unified market may become more important for the Czech Republic after the country's planned joining of the euro zone in 2010.