UK mortgage market and Home Information Packs

Along with the forthcoming implementation of HMO's (houses of multiple occupation) and now Home Information Packs are these initiatives in the public interest. A 6 month pilot scheme within the Bristol area has been seen as somewhat lightweight and still leaves many questions unanswered.

The government has assured everyone working in the industry that it will not introduce HIPs until it is absolutely clear that they are going to work. How will the property market be affected either side of the proposed launch in June 2007. There are good reasons for expecting a glut of properties on the market before June 2007 – as sellers rush to avoid paying up to £1,000 for a pack – and a shortage thereafter. The benefits will be a more efficient method of buying and selling property – but the benefits need to be measured against the significant costs for the industry and consumers.

In contrast to all the uncertainty about the government’s plans, there is a very clear message from lenders about HIPs. The reality is that they will not change their fundamental requirement for a reliable valuation of a property providing security for a loan. A valuation provides an independent, reliable, indemnified and timely assessment of a property’s worth. It is an immutable requirement for prudent lending, protecting both lender and borrower. Is it therefore likely that a property for sale will require two valuations?

Lenders are likely to need a valuation report for both low and high value properties, for properties in rural locations or other areas where comparing the value of another property is difficult. Properties built using non-traditional or unusual materials or methods of construction. Older properties, or ones where the buyer wants to borrow a large sum relative to its value and borrowers with credit risk or other problems. Some 40% of all mortgages for house purchase have a loan-to-value ratio of 80% or more. In these cases, lenders are likely to require a separate inspection, regardless of the Home Information Pack.

The Danish equivalent of HIPs had affected the number of transactions in that country. The chief executive of the Danish Association of Estate Agents, Palle Ulstrupp, said that packs had deterred speculative sellers of property and that there were consequently up to 25% fewer homes on the market since their introduction. He also said that there was a fundamental mistrust by buyers of HCRs commissioned by an estate agent marketing the property.

But if the implementation plans are flawed or cannot be completed in time, the government must be prepared to re-consider its proposal for introducing HIPs in June 2007.
Martyn Witt
First Mortgage Trust
PO Box 2587
BATH
BA2 6ZA
www.mortgage-loan-uk.net

This release was published on openPR.