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It’s too early for doom mongers to write off HIPs

Draft regulations on Home Information Packs published by the government last week have met with a mixed reaction from the mortgage industry.

Though the market has long been aware of the plans to implement the packs and speculation regarding their content has proved largely accurate, publication of the laws has brought a fresh wave of cynicism. There is concern that the market for carrying out Home Condition Reports will be saturated by opportunist firms employing inspectors unqualified to carry out the process – so-called cowboys.

Some critics say buyers will be wary of reports carried out on behalf of sellers and will not trust the information contained in them. This could lead to buyers commissioning their own reports, rendering HIPs obsolete.

The most important problem that could stem from the introduction of HIPs is a distortion of the housing market caused by sellers eager to get rid of properties before the schemes starts, and a subsequent shortage.

Brokers reliant on purchase business ahead of remortgage cases could be squeezed out of the process as buyers use estate agents as their first port of call. But such a trend could also provide the opportunity for brokers to establish links with estate agents who do not offer their own mortgage facilities.

The publication of the draft regulations was undoubtedly an attempt to allay fears on what HIPs will contain, but pundits remain worried the government has not set up appropriate certification arrangements to control not only the production of the reports but also the people who produce them.

While HIPs will not be compulsory until 2007, enough time must be given not only to allow the housing industry to absorb the process but also to allow surveyors to be trained.

In an industry browbeaten into compliance with regulations imposed by the Financial Services Authority in 2004, it is easy to focus on the negative impacts of HIPs. But it is important to remember that the government is planning to help first-time buyers and aiming to cut the overall cost of buying and selling a home. The government claims that at present more than a quarter of all house sales fall through after an offer has been accepted, largely due to problems that emerge when surveys or valuations are carried out. It estimates that 1m a day is wasted on failed transactions and hopes HIPs will eliminate this.

There will be those who argue the government’s focus on assisting first-time buyers is an unfair concentration on an area of the market that does not need artificial stimulation but schemes that create a higher proportion of satisfied house purchasers can only benefit the industry.

The effect of HIPs won’t really be known until after their introduction in 2007. It’s far too early for the doom mongers to write them off yet and, with further cooperation from the industry during the development of the process, they could provide a welcome boost.

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