Lenders take new look at mortgage discount deals.
The Council of Mortgage Lenders said it was introducing new standards for the conveyancing and valuation of these properties following concerns from lenders that they were not always informed about the discounts and incentives being offered by developers.
With many builders offering deals on new homes in a bid to meet sales targets in the current market downturn, lenders have expressed concern that they could inadvertently be advancing more than the true price paid for the property.
Typical incentives include developers offering to pay buyers' deposits, or legal and moving fees, or even offering cash-back incentives on completion of the sale.
But lenders are concerned these offers are not reflected in the official asking price.
The CML warned in February that the valuation difficulties surrounding new build properties had attracted fraudsters, leading to a disproportionate increase in the number of frauds perpetrated against new build flats located in city-centres.
As a result some lenders have reduced the loan to value ratio they are prepared to advance on a new build apartment, demanding deposits of up to 25 per cent in some cases, while others have stopped lending on them altogether.
Under the changes, which come into force on September 1, builders and developers will have to complete a new disclosure of incentives form, which will consist of 12 questions to establish details of all financial and non-financial incentives being offered.
This will be reinforced by the CML's Lenders' Handbook and The Royal Institution of Chartered Surveyors Red Book.
Business, page 20
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|Publication:||The Birmingham Post (England)|
|Date:||Jun 12, 2008|
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