Providers must sell benefits of HCRs

The government’s climbdown over plans for Home Condition Reports to be included in Home Information Packs has prompted a deluge of media activity. But as this flood starts to recede the focus must shift to the implications for the mortgage industry.

Showing the political sensitivity that the HIP initiative has generated, housing minister Yvette Cooper made the announcement via a written statement the afternoon before a parliamentary debate on the proposals. This allowed her to claim, when the debate took place, that it represented the government heroically saving the day for home buyers by ensuring the system will provide them with the protection they need while being workable in practice.

Away from this political rhetoric the business of buying and selling properties continues. Many commentators, including the BSA, had expressed concerns, recognised by the government, that the introduction of HIPs could have a destabilising effect on the housing market. With HCRs removed from HIPs, the packs are likely to have far less impact on the housing market. But a seller will still have to provide a HIP before they market their property.

From a building society perspective, the news that the HCR has been made voluntary is good. There was concern that the requirement for a survey in addition to the HCR would at best confuse buyers and at worst spark disputes between buyers and lenders because buyers would assume the HCR met lenders’ requirements and be bemused when asked to pay for a mortgage survey.

The government was expecting lenders to use automated valuation models to remove the need for physical inspections and it is true that the use of AVMs has increased and is expected to rise further in the future. But for most new applications, a physical inspection will still be required. This is because it would not be prudent to rely on an automatic valuation when LTV ratios are high, when a property has a high value or where the property is either a new-build or of non-traditional construction.
The government was briefed on these issues by lenders and it is gratifying that it listened and took action.

Of course the government is now getting grief from potential home inspectors, worried that a significant earning opportunity has been lost. But if HCRs will bring the benefits that proponents have claimed, it is up to HIP providers to sell these to clients.
In making HCRs voluntary, the government has done the right thing. The requirement for HCRs will not now disrupt the house buying process yet HCRs can still be provided. It is now for HIP providers to demonstrate their benefits to sellers and reap the rewards.