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IMLA expresses HIPs concerns

Amanda Jarvis

April 25, 2006

Almost three-quarters (74%) of mortgage brokers expeced home buyers to be tied into packages by estate agents which will mean that estate agents and their advisers will sell more mortgages, giving less opportunity for independent mortgage advisers. 35% of respondents anticipate that they will generate less mortgage business as a result.

At the time when HIPs are introduced, most intermediaries (66%) anticipate that there will be a surge in property transactions prior to implementation date as sellers rush to secure a sale without a Pack. On the other hand, an even greater percentage (of 71%) expect transaction volumes to decline after HIPs become law. This mirrors the view of lenders in a separate survey by IMLA. They expect that in the two months before the introduction of HIPs the number of transactions taking place will rise by about 15%, while in the couple of months after the introduction they are forecasted to decline by about 17%.
While many observers believe this distortion of the market will be temporary, a worrying 47% of brokers expect there to be a long term reduction in sales. This may not be conducive to a flexible and buoyant long term property market.

Most brokers expect the introduction of HIPs to have an impact on house prices over the short, medium and long term – though there is little consensus as to exactly what the impact will be. A similar proportion of respondents think that prices will rise as fall over the short and medium term, while on balance intermediaries are more likely to expect prices to rise over the long term, as sellers recoup the cost of the Pack from their purchaser.

Lenders showed themselves sceptical about using the home condition report from the HIP in their valuation process. So far, a number of lenders have not yet made a final decision, but others indicated that they would be relying on other techniques such as an automated valuation model or a separate appraisal by a surveyor. Interestingly, only one lender said they would definitely use the home condition report.

For their part, 50% of brokers indicated that they were more likely to recommend a lender who did accept a home condition report. They tend to believe that if lenders do accept the report as part of their valuation process it will speed up the transaction, but also increase the cost.

Overall, lenders have a resoundingly unfavourable opinion of HIPs, with 68% describing them as a poor or a bad idea, and just 16% sayinig they were a good idea, reflecting widespread concern about the introduction of the Pack.

Lenders’ concerns over HIPs focus on two principal aspects – speed of transactions and cost. While one of the government’s stated aims in introducing the Pack is to speed up transactions, over half of lenders think HIPs will make no difference to the time it takes for a housing transaction to be completed and 42% think it will be slower or much slower.

In terms of cost, the results of the poll are even more worrying: a massive 84% of IMLA members firmly believe that costs will increase and more than a quarter (26%) say they will go up a lot.
Lenders’ Opinions – what will be the impact of HIPS in terms of:

IMLA members remain mostly sceptical about the chances of HIPs being implemented as planned by June 2007, with 79% expressing doubts. In fact, 21% of them say there is ‘no chance’ of HIPs being introduced on schedule and 58% were ‘not very confident.’


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