New rules from CML to help mortgage industry
02 September 2008 / by Rachael Stiles
The CML has announced new guidelines regarding the valuation of new build homes, which, it is hoped, will prevent lenders inflating the property’s price above its true value.
Homebuilders desperate to sell properties must come clean about what incentives they have offered to homebuyers in order to sell them a house, the CML said, such as paying the deposit, or covering legal, valuation, or moving fees. Some even offer cash back in an effort to shift properties.
Some construction companies have been deliberately hiding this information from surveyors, according to the Royal Institute of Chartered Surveyors (RICS), but it is hoped that the tighter guidelines – which include a ‘disclosure of incentives’ form – will bring about more clarity, ensuring that a mortgage is based on the true value of a property and therefore prevent lenders from unduly jacking up the price.
“These measures to reinforce confidence in the accuracy of valuations of new-build properties will help underpin this segment of the market.” said Michael Coogan, director general of the CML.
“This is particularly important at a time of limited funding availability for house purchase transactions. If developers ensure that they are transparent, and disclose any discounts or incentives on offer to buyers, lenders’ confidence should start to return. In the meantime, recent lender experience means buyers of new-build properties will be expected to provide significant deposits so that lenders can manage their risks.”
Both lenders and borrowers will be protected by these new measures, the CML explained; it will protect mortgage customers from fraud, and will help lenders by reinforcing confidence in the new-built property market, which has taken a hit recently as a result of losses and fraud.
The CML’s plan is supported by major housing groups, such as RICS, the Law Society of England and Wales, and the Home Builders’ Federation.
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