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Mark Chilton on Mortgages

The whole industry is focusing on the impact of the last quarter of 2003, but I believe a more fundamental challenge to the independent broker, who makes up the majority of our market, will come from the introduction of the seller&#39s pack.

First a few words on why these proposals are not just wrong but misplaced. The very limited trial of the packs in Bristol a couple of years ago was not just so small as to be statistically irrelevant but its findings were also far from conclusive that the pack solved the delays in the housebuying process which lead to an increased risk of gazumping in certain market conditions. Nevertheless, the legislation rolled on, little changed, and now, if not top priority, looks certain to arrive in 2006.

What all this fails to recognise is that since the initial decision was made to speed up the purchase process using legislation, the industry has moved on and made the whole act unnecessary. Mortgages can now be offered in days rather than weeks and this is likely to improve, as structural surveys can be arranged in similar timeframes, which leaves only the bane of every mortgage administrators&#39 lives – the lawyers. Progress is being made here, with the majority of Land Registry searches available online, the development at last in the UK of title insurance and new specialist firms of solicitors taking advantage of these developments. The only serious timing risk lies with local authority searches.

By 2006, when the act is likely to be introduced, there will be no need for it. A willing buyer and seller will be able to exchange within a week but the fundamental gazumping risk will remain. Sellers will always delay any process if there is a hint of a better offer – better that the entire effort had been directed at improving turn round times on local authority searches. In fact, the packs, with their potential high up-front costs, will act as a deterrent to mobility and, by adding to transaction costs, will further damage the position of first-time buyers.

But this unnecessary legislation will have its biggest impact in the independent estate agency and mortgage broking markets. The major agency chains are all reviewing new ways of using the pack to lock in sellers and buyers to a far wider range of services. With the power of their balance sheets, major groups such as Countrywide and Halifax have the financial clout and in-house surveyors to present the seller&#39s pack as a ” free” service, provided that both buyer and seller use them for mortgages. Small independent agents will not be able to compete and their power as an introductory source for smaller independent brokers, which will be enhanced by the advent of regulation this year, could be eroded in two years time. The fact that this is totally uncompetitive has completely passed the Government by. For the rest of us, we need to be thinking distribution ahead now. For the industry this will only speed up consolidation.

As for top-up fees – they should be paid for by higher-rate tax on earnings over £100,000. Over 90 per cent of those benefited from free tertiary education and should make it available for ensuing generations. And please no marketing of equity release as a form of funding -it is too cynical even for our industry.

Mark Chilton is chief executive of Clearly Financial Group


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