HIPs are a threat to intermediaries

The advent of Home Information Packs poses a potential threat to mortgage brokers who do not have access to the information contained within them, says Frank Eve

A number of estate agents, solicitors and online property portals have been working on plans to provide Home Information Packs for consumers. These plans are well advanced but the majority of mortgage intermediaries and some lenders have yet to consider how this legislation will affect mortgage distribution as their focus has been on regulation. It is now time for lenders and intermediaries to think about the threats and opportunities this legislation will create and how technology can be the key to opening up a new channel to borrowers.

The Housing Bill, announced in the Queen’s Speech in November 2003, proposed the mandatory creation of an HIP as part of the home purchase process. The pack will contain among other items proof of title and a Home Condition Report. The HCR will provide information on the condition and energy efficiency of the property. It will be a mid-range inspection, broadly similar to the Royal Institution of Chartered Surveyors’ Homebuyers Survey and Valuation. The information in the HCR will be used to inform the buyer, seller and lender. Section H of the HCR consists of an energy report in which the energy efficiency of the property is estimated using the government-approved Standard Assessment Procedure.

The HCR will contain benchmarks for comparison. These may be absolute comparisons with the whole housing stock or relative comparisons with properties of a similar age and built-form. The HCR will also suggest measures to improve energy efficiency and will estimate the potential energy efficiency of the property if the measures are implemented.

The HIP is supposed to improve the efficiency of the home purchase process. The current process is slow and stressful and has a high failure rate. A total of 28% of offers made and accepted fail to proceed to completion. The HIP aims to reduce the transaction failure rate by making the home purchase process faster, more certain and more transparent. It is intended to provide buyers with the information they need to make informed decisions earlier in the process and enable the buyer and seller to negotiate terms from an informed position.

This poses a potential threat to intermediaries. The company that controls the HIP has all the data required to provide an online instant valuation which could be used together with the instant binding decision technology of a lender to provide an instant mortgage offer for the buyer.

Although the HIP doesn’t provide a valuation it will have the data required to provide an online valuation from market data and the data contained in the report. Valuations can be provided in a packaged form to the lender at the same time as contact with a prospective buyer. This could be a barrier to those lenders and intermediaries who don’t have access to this data.

The opportunity is for HIP providers and lenders to build and integrate the required systems to provide a full online service. I will be exploring this subject in more detail in the coming months to give a better picture of the players in this market and the long-term effect on mortgage broking.