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Buying a new build?

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The Council of Mortgage Lenders is today introducing new measures to help ensure that conveyancing and valuation processes capture the true value of newly-built properties.

From today, lenders will ask builders or developers of any newly-built, converted or renovated property to complete a new ‘disclosure of incentives’ form. The aim is to ensure that any discounts or other incentives offered by developers are disclosed to the lender. This will ensure that any mortgage is granted on an accurate valuation, and help prevent fraud.

Commenting on the new measures, the CML’s director general Michael Coogan said:

“These measures to reinforce confidence in the accuracy of valuations of new-build properties will help underpin this segment of the market. 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.”

TBPL View:

This is likely to make it slightly harder for potential borrowers to find a mortgage on a new build at a time when the lenders are already looking harder at the loan to value ratio. Two years ago we were hearing about Lenders’ eagerness to loan 110% of the value of the property and now we are seeing a retreat to the scenario where banks want borrowers to pitch in 25% plus of the purchase price as they seek to reduce their exposure to risk.

Property developers are unlikely to be happy at the change in policy – what do they care if the mortgagee defaults on the mortgage?

Source: CML website

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