CML introduces new valuation process to help reinforce confidence in new-build market

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Monday, 01, Sep 2008 12:00

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.

Making sure that a mortgage offer is based on the true value of the property provides more effective protection for both lenders and borrowers. This will help reinforce lenders’ confidence in the market for newly-built property, which has fallen due to recent experience of losses and frauds.

In the past, lenders have been concerned that valuation and conveyancing processes do not always capture discounts and incentives available from developers.

From today, the CML is amending its standard industry instructions to conveyancers, requiring them to get a copy of the completed disclosure of incentives form from the conveyancer acting for the developer. The CML’s initiative is supported by the Royal Institution of Chartered Surveyors, the Law Society of England and Wales, the Home Builders’ Federation, Homes for Scotland and the Construction Employers Federation.

Commenting on the new measures, CML 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.”

NOTES TO EDITORS

1. The Council of Mortgage Lenders' members are banks, building societies and other lenders who together undertake around 98% of all residential mortgage lending in the UK. There are 11.74 million mortgages in the UK, with loans worth over £1.2 trillion.

2. More information about the initiative and the disclosure of incentives form can be found here.

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