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Sharp practices will deter lenders

The Council of Mortgage Lenders’ disclosure-of-incentives form has gone a long way towards resolving issues around new-build pricing.

In the past prices were distorted by developers who offered significant incentives that were effectively discounts on the price.

The incentives were described as a cashback, but could include interesting offers such as buy a flat and get a free Porsche.

The disclosure form was therefore a positive step but most lenders still ask valuers to provide a second-hand value of any new-build property.

And unfortunately, there are still practices for concern.

Let me give you an example. There is a building in Manchester built in 2008, but still being advertised by developer A. Access is provided by developer A, but an incentive form is provided by firm B. On investigation we discover that firm B has not yet bought the property – it is looking to do a back-to-back sale, with developer A apparently complicit.

The following advice appeared recently on a property investor’s blog: “When filling out the form for a remortgage, never be conservative. If you bought it for £23,500 say it is worth double that. This way you can raise the maximum amount of the cheapest borrowings to buy further properties.”

Such practices may generate short-term gains for a few. But in the long term they serve only to deter lenders from returning to markets.

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Long run

Long run Finally, Mole would like to congratulate Lloyds Banking Group’s sales director of mortgages Nigel Stockton following his fantastic performance in the Tokyo Marathon.