CML begins work on fracking policy

John Hewitt Jones

October 20, 2016

The Council of Mortgage Lenders has said it will continue to review the impact of fracking on mortgage applications.

The move follows calls from industry leaders for the trade body to adopt a position on the impact of shale gas drilling.

Earlier this month communities secretary Sajid Javid gave permission for energy company Cuadrilla Resources, overturning a decision by Lancashire Council.

Drilling at the Preston New Road site in Lancashire is set to go ahead, despite campaigners and local authorities blocking fracking in 2011 after Cuadrilla drilling caused a minor tremor at another Lancashire site.

However, the expanding energy sector may have further-ranging implications for the UK mortgage market.

Experts from the University of Bristol have raised concerns about the impact of fracking on house prices, warning that properties within a 30 mile radius of sites could see a 4% drop in value.

Industry executives have highlighted the headache a shift in house prices near fracking sites could cause for lenders, stating the need for industry-wide clarity over the issue.

Ray Boulger, senior technical manager at John Charcol, said: “There are two fundamental issues: will it actually have a negative impact on the environment.

“The second impact to be considered by a lender is what will happen to house prices.

“I can understand why valuers want lenders to have a policy on this. Although a lot of lenders’ views are the same, there are a few cases where individual lenders do vary.

“Although a lot of lenders’ views are the same, there are a few cases where individual lenders do vary.

“The problem lenders have got is that if they red-line properties in an area, then it affects the value of houses in the area.

“The impact of doing that would mean that a whole section of their mortgage book would be adversely affected.”

“If only one or two lenders were to do this then it wouldn’t be a problem. This is really a problem on which the CML needs to formulate a policy.”

Gareth Hill, spokesman for CML said: “We are in the beginning stages of working on the impacts of fracking on mortgage applications.

“Individual lenders will have their own processes at this stage, rather than an industry standard.”

A spokeswoman for RICS said: “RICS are keeping a watching brief on this and will provide an update with any further information that emerges.”

The spokeswoman added that RICS professional standard guidelines state some property will be affected by environmental factors that are an inherent feature of either the property itself, or the surrounding area, and could have an impact on the value of the building.

Professional RICS guidelines also state valuers should highlight the limits that will apply to investigations and assumptions made in relation to environmental matters.

Drilling companies believe trillions of cubic feet of shale gas may lie beneath the UK, and more than 200 onshore exploration licences have been awarded to energy companies so far.

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