Lenders want own valuation despite HIPs

Friday, 30 June 2006 12:00 AM

Mortgage lenders still expect to be carrying out their own inspections of properties five years after home information packs have been introduced.

A survey by the Council of Mortgage Lenders (CML) shows that lenders anticipate using automated valuations, supported by information contained in a home information pack (HIP), in about 40 per cent of cases.

In half of cases they believe they will still have to send a valuation inspector to physically inspect the property before agreeing to lend the money to the buyer.

Home information packs, which will be compulsory for anyone selling their house after June 2007, will contain a home condition report providing information on the condition of a property.

The packs, which will also contain legal documents required for the sale of the property, are likely to cost £600 to £700 for an average sized home.

However, this research suggests that in most cases buyers will still have to pay for a lender's valuation, despite the homeowner having already paid out for a home condition report (HCR), even five years after the introduction of the packs.

For someone looking to move from one property to another, it means paying for a report on the condition of their current property and the one they want to buy.

"Even those who are enthusiastic about HIPs do not expect to replace physical inspections with automated valuations on a wholesale basis," said CML head of policy Jackie Bennett.

"Currently a physical inspection is used in 99 per cent of applications for house purchase. Although the market may move more quickly than anyone can anticipate, lenders' current best estimate is that 40 per cent of valuations will be automated five years after HIPs have been in place."

The CML's survey shows that mortgage lenders are generally supportive of home information packs, and two thirds intend to become providers.

Eight out of ten lenders believe that the introduction of the packs will reduce the need for a physical inspection of a property, and seven out of ten believe the use of automated valuations will increase within a year of the implementation of HIPs.

Lenders are also anticipating a big rise in the number of properties being put up for sale in the run up to June 1st 2007, when the packs will become mandatory, and a decrease immediately after this date.

"This research shows, as we have so often repeated, that lenders are generally not anti-HIP in principle," Ms Bennett added.

"It is the practicalities, the government's expectations, and the possible unintended consequences that cause them concern."

Paul Broadhead, deputy director general of the Association of Home Information Pack Providers, said: "Lenders are currently stating that following the introduction of HIPs they will still require buyers to pay for a separate survey.

"However, I am confident that this will change, if HCRs can be fed into AVMs (automated valuation models) they will address all of the elements currently satisfied by an on-site valuation enabling lenders to make an offer instantaneously."

But critics of home information packs seized on the report as another sign that they are flawed.

Shadow housing minister Michael Gove said: "The truth is these sellers' packs will put up the cost of selling a house and create more red tape, without solving the problems they're meant to."

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