The standards come into effect on September 1 and aim to ensure the conveyancing and valuation processes determine the true value of the property, reducing risk for borrowers and lenders.
Some lenders are concerned that current processes do not always capture discounts and other incentives that buyers may be able to negotiate with developers when buying newly built property. As a result, lenders could unintentionally offer a mortgage based on a valuation of a property that is higher than the true price paid for it.
From September, lenders will require builders or developers of any newly built, converted or renovated property to complete a new disclosure of incentives’ form. This will be reinforced in the CML’s lenders’ handbook.
The Royal Institution of Chartered Surveyors will be amending its guidance to members to support the new requirements.
The Home Builders’ Federation and Homes for Scotland have recently added to their own codes of conduct to encourage greater transparency about discounts and other incentives and major builders are taking their own steps to address the issue.
CML director general Michael Coogan says: “We are introducing these measures to help sustain confidence in the market for newly built property. Lenders need to know about discounts and other incentives so they can be sure that the decision to offer a mortgage is based on a reliable valuation of the property. The new measures will provide additional security and safeguards for borrowers, as well as lenders.”
In a joint statement, the Home Builders Federation and Homes for Scotland say: “These initiatives will ensure that housing developers maintain the confidence of mortgage lenders and help with the process of buying a new home.”