On the surface at least, 2006 looks set to be a fairly uneventful year for the mortgage and housing markets. Lenders and brokers agree that house prices and interest rates are likely to remain stable for the next 12 months, with no unexpected price hikes or sudden crashes.
Home Information Packs
Any upset is likely to come from new developments in the wider market. Top of the list is the introduction of Home Information Packs (HIPs), which will significantly change the process of buying and selling houses over the next couple of years. In 2006 the government will introduce voluntary HIPs, making them compulsory from June 2007.
After that, you will need to have a HIP prepared before you put your property on the market. Included in the pack, along with searches, maintenance work guarantees and planning permissions, will be a Home Condition Report a property survey that is more detailed than a homebuyer survey but less so than a full structural survey.
Good or bad news?
Opinion is divided on the impact HIPS will have on homebuyers. Richard Lloyd, director of surveying services at Hockleys, says: The introduction of HIPs will alter the way residential property is marketed in England and Wales, with increased costs of between £800 and £1,000 for the seller of the property. While many potential HIP providers are talking of offering a HIP with no upfront cost, it will still have to be paid for in another way. Trevor Youens, director of Home Information Pack specialist the Live Organisation, backs up this warning. He says: Somewhere along the line the packs will need to be paid for and ultimately the cost will probably fall on the seller.
Tamsin Hemsley, media relations manager at Nationwide, says however that by providing key information at the beginning of the homebuying process, HIPs will significantly cut the number of sales that fall through.
Louise Cuming, head of mortgages at price comparison website Moneysupermarket.com, agrees. She says: The introduction of HIPs should make the housebuying process more transparent and should save millions in wasted fees from abandoned transactions. The new system will benefit first-time buyers in particular, who will receive the full information without having to pay for it and so find their first steps on the housing ladder more affordable.”
HIPs may even have an effect on house prices. Hemsley adds: There may be a balloon of properties coming on to the market prior to the implementation period in June 2007, which may depress prices.
How much HIPs will cost the seller is unclear. But, importantly, there will be no cost to the buyer, who stands to benefit most of all from the new system.
Treating Customers Fairly
Something else that will hopefully benefit not just mortgage borrowers but anyone who buys financial products from mortgages to savings accounts is the Financial Services Authoritys Treating Customers Fairly (TCF) initiative, launched in 2004. This aims to do exactly what it says on the tin, but what real benefits will customers see?
Most lenders claim that they already treat customers fairly, but they acknowledge that the financial services industry could do with a more customer-focused overhaul. Pete Sowden, service quality manager at Yorkshire Building Society, is in charge of the companys TCF policy. He says: We have had fairness at the heart of our culture for some time. For example, we dont oversell to customers but sell for their needs. As an industry we havent got the best reputation in the world as far as treating customers goes, and the media focus on fairness is intensifying all the time. The trust that the industry has lost will have to be built up gradually. Mike Hounsell, spokesman at Norwich & Peterbrough Building Society, believes some tangible benefits will be apparent in 2006. He says: The TCF initiative will force all businesses to reappraise whether they are putting customers needs first. Communications about mortgages will be simpler and easier to understand. There will be increased transparency around mortgage fees and charges, and perhaps even an explanation of what charges are for and how they are justified, and any potential complaints will be dealt with appropriately.
Mike Fitzgerald, sales director at Brentchase Financial Services, agrees that great clarity is the most important factor: Mortgage regulator the FSA has done a good job in the past year, and 2006 will be a big challenge for it as it tries to achieve its goal of truly helping the public to understand financial affairs.
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