Posted on 4 February 2008 by
The costs of buying a new home are not transparent and should be made clearer, the Council of Mortgage Lenders (CML) has said.
In an article in its fortnightly newsletter, the CML argues that the increase in discounts and incentives offered by sellers in recent years has confused the value of many new homes.
New-builds can be hard for surveyors to value accurately because of the variable 'new build premium' that buyers are willing to pay, as well as a lack of comparable properties on the market.
The CML says that developers routinely offer a package of incentives to new-build buyers, which may include payment of legal fees and stamp duty, cash-backs, reduced mortgage payments or guaranteed rent for a set period.
If these incentives are not clear to those valuing the properties and lending the mortgages, then the amount lent may be too high. The CML says that as well as generally undermining confidence in the market, the situation has attracted fraudsters, who bulk-buy new developments and sell them on without disclosing the initial transaction.
To tackle the problem, the CML says that it wants to see amended guidelines in its Lenders' Handbook, the Royal Institution of Chartered Surveyors' (RICS) Red Book, and in lenders' own mortgage application forms.