Heading for HIPs
The government’s aim of introducing Home Information Packs (HIPs) onto the UK housing market by June 2007 drew a step closer earlier this month as the Office of the Deputy Prime Minister (ODPM), now the Department for Communities and Local Government (DCLG), introduced dry runs to assess the effectiveness of HIPs in advance of their implementation next year.
The government’s key objective in introducing the packs is to speed up the buying process and improve overall efficiency within the housing market for the benefit of both buyers and sellers, as almost £1 million is estimated to be wasted every day through aborted house purchase transactions.
Nevertheless, industry experts are warning that the knock-on effects on both consumer spending and the wider mortgage industry could be extremely costly as new systems will need to be set in place to deal with the assessment process.
In light of this, Prestige Acceptance is taking active measures to develop new links with mortgage brokers, who will potentially play a key part in reducing the impact of HIPs on the market.
In order to add value to the campaign, the company attended the Mortgage Business Expo at the G-MEX centre in Manchester recently, where seminars were held to raise awareness of HIPs among industry experts in order to pave the way for their introduction next year.
To date, the industry has cast doubts on the presumed advantages of HIPs. In fact, according to experts, HIPs will incur an additional cost of between £600 and £1,000 to sellers. If not managed correctly, the cost incurred could lead to increased house price inflation and a possible reduction in the number of properties available as home owners look to buy and sell before HIPs become legally binding on 1 June 2007. In the meantime, property agents are expecting a sharp influx in the number of properties available for sale leading up to this date.
For mortgage lenders and brokers, who have a significant stake in the future of the housing market, concerns are also looming over the possibility of a slow-down in consumer spending as witnessed at the end of last year, which could have a detrimental effect on the market as HIPs are introduced.
However, the overall impact on the prime industry areas, which include lending and brokering, will be positive, provided collaboration between these sectors is encouraged over the coming year.
As part of the HIPs process, a Home Condition Report (HCR) will be undertaken, which will assess the overall structure of the property in advance of its sale. Trained and certified home inspectors instructed by the government will be responsible for carrying out the report; and lenders, sellers and buyers will have a contractual right to rely on the findings of the survey.
Despite this, many consumers will be wary of relying on the report alone, and this will be true of many lenders, many of whom will also require a valuation in advance of offering a loan.
A valuation, which acts to protect the lender and borrower, will most probably be requested, despite the introduction of HIPs which aim to protect sellers and buyers.
This means that lenders and intermediaries alike may not be directly affected by the introduction of HIPs, and therefore the focus should be on developing ties between brokers and lenders.
The cost associated with HIPs will place extra financial strain on the seller, which will result in some sellers, especially those with families, turning to secured loans companies to help bridge the gap.
For secured loans companies, this will present welcome new business opportunities, which could also benefit those operating in the mortgage intermediary market. For example, if a mortgage introducer sends a client’s details directly to a secured loans packaging company to cover the debt, the introducer will be paid commission by the secured loan company, who is also making a profit from the loan, and the seller will also be free from worrying about sourcing funds.”