Lenders tighten valuation criteria on new homes
Lenders tighten valuation criteria on new homes
Britain’s mortgage banks and property valuers are to tighten up their conveyancing procedures in the wake of a housing downturn that has exposed some sharp practices on newly built homes.
“Some lenders have been concerned that the valuation and conveyancing processes do not always capture discounts and other incentives that buyers may be able to negotiate with developers when purchasing newly built property,” the Council of Mortgage Lenders (CML) said in a statement.
“This may mean that, in some instances, lenders might unintentionally offer a mortgage based on a valuation of a property that is higher than the true price paid for it.”That has left some buyers of newly built properties more exposed to the risk of negative equity as house prices have tumbled and increased the potential for repossessions.
From September 1, lenders will require builders of any newly built, converted or renovated property to disclose any buyer incentives so that the decision to offer a mortgage is based on a reliable valuation of the property, the CML said.
CML members are responsible for 98 percent of all residential mortgage lending in the UK.
According to Britain’s biggest lender HBOS (HBOS), the average cost of a UK home has fallen by almost 8 percent since prices peaked in August but anecdotal evidence and economist forecasts suggest the downturn is still in its early stages.
The CML has said it expects gross mortgage lending to fall by a fifth in 2008 compared with 2007.
Lenders tighten valuation criteria on new homes / Author: kuku
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