CML requires housebuilders to declare buyers’ incentives

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by Lin Freestone

From September onwards, new regulations to be brought in by the Council of Mortgage Lenders (CML) will require housebuilders to declare the incentives of their buyers. It is perceived that this measure will enable lenders to offer mortgages that reflect the accurate value of the property.

The completion of a form disclosing incentives will help to prevent lenders from unwittingly offering excessive mortgages based on misleading property valuations.

Lenders need to know if any discounts or cash back offers are being made by housebuilders. Other enticements that may be offered to potential buyers include payment of the first year’s mortgage, or the offer of a new kitchen.

The CML considers that confidence in the market for newly-built property will be sustained by the introduction of these measures.

The additional security will be a safeguard for borrowers and lenders alike. An inflated Land Registry valuation could see a buyer in possession of a mortgage which is worth more than the value of the property.

The new initiative for transparency has been welcomed by the Home Builders’ Federation, Homes for Scotland, the Royal Institution of Chartered Surveyors and responsible housebuilders.

Members of the CML lend 98% of the total value of UK mortgages.