Lenders will now ask builders or developers of any newly-built, converted or renovated property to complete a new ‘disclosure of incentives’ form, highlighting any discounts or incentives that the developer has offered the buyer before the mortgage is approved.
The CML says this will ensure that any mortgage is granted on an accurate valuation, and help prevent fraud.
Currently developers offer the buyers discounts on new-builds, which are not admitted to the lender. This means unscrupulous buyers and developers can deceive mortgage lenders out of thousands of pounds.
Last week buy-to-let lender Bradford & Bingley admitted to have lost £18 million in the first half of this year thanks to mortgage fraud. It says this is a problem for the whole industry, and is perpetrated by mostly property professionals such as developers, conveyancers and solicitors.
The council hopes this directive will help reinforce lenders’ confidence in the market for newly-built property, which has fallen due to recent experience of losses and frauds.
From today, the CML is amending its standard industry instructions to conveyancers, requiring them to get a copy of the completed disclosure of incentives form from the conveyancer acting for the developer.
This move is backed by the Royal Institution of Chartered Surveyors, the Law Society of England and Wales, the Home Builders’ Federation, Homes for Scotland and the Construction Employers Federation.
CML director general Michael Coogan says: “These measures to reinforce confidence in the accuracy of valuations of new-build properties will help underpin this segment of the market. This is particularly important at a time of limited funding availability for house purchase transactions.
“In the meantime, recent lender experience means buyers of new-build properties will be expected to provide significant deposits so that lenders can manage their risks.”