A report sponsored by Europe's Mortgage Insurance Trade Association reveals that there is over €500 billion ($639.3 billion) in untapped mortgage potential across Europe. The report, conducted by consulting firm Mercer Oliver Wyman concludes that over 80% of growth potential is most likely to be in higher risk lending products, a segment that includes low down payment, highly-indebted or non-traditional borrowers.

"The commercial pressures on mortgage lenders have never been greater - with margins falling in most countries, the credit cycle turning and house prices now stagnating in many markets," said Mercer Oliver Wyman Director Matthew Sebag-Montefiore. "In this tough operating environment, Basel II is threatening to flood capital into the mortgage sector, with the lower risk-weights that will apply to conforming, prime mortgages. This leaves the lenders with a very tricky position as to where they can find the next wave of profit growth."

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