Seller's packs will be with us either in early 2005 or 2006. That is the commitment from the Government that was outlined in the Queen's Speech documents and which will be proved when the revised Homes Bill is reintroduced to Parliament in the next few weeks.
After all the years of will they, won't they, we seem at last to be set for a firm piece of legislation and the Parliamentary time to get it into law.
There will be rocks on the road – perhaps more of a boulder on the issue of where the surveyors are going to come from to carry out the huge number of home condition reports that the process will require – but the Government seems committed to pushing the legislation through this time.
Timing will be another issue. The mortgage industry, lenders and brokers, will be preoccupied with making their new regime for mortgage advice work efficiently from the back end of 2004 and will have little time to devote to thinking about how to handle seller's packs.
However, it is not so much the packs themselves that could be concerning mortgage brokers and financial advisers but the possible shift in the balance of power among the players in the housing and mortgage market.
There are two threats now being talked about – the production of packs by lenders as a customer-retention activity, and the potential dominance of the estate agency market by the big corporate agency chains using seller's packs as loss-leaders.
What might lenders do? In the current mortgage market, every lender must be concerned about the level of lender swapping that is going on. The days of staying with a lender for life went years ago – as lenders themselves educated the public into the benefit to be gained from shop- ping around for the best mortgage deal, helped by an enthusiastic mortgage intermediary market.
The Mori research just published by the Council of Mortgage Lenders shows that six in 10 borrowers have arranged their current mortgage in the last five years and one third have switched mortgage without moving home. Borrower promiscuity is rife.
If you are a lender, you are desperate to keep hard-won customers with you. Offering a seller's pack free to existing customers if they take their new mortgage out with you might look like a good option, particularly if you can get the survey and perhaps some of the legal work done in house at cost price.
Where would this leave the mortgage intermediary? Out of the loop, that is where, potentially losing the chance to advise customers on the best deals around because they have already decided they are staying put.
Realistic? Likely? Certainly. But a successful ploy by the lenders? I do not think so.
For a start, the educated borrowers who are causing this apparent problem in the first place will surely be canny enough to realise that there will still be better deals out there that will make the prospect of a free £500 worth of pack look a pretty paltry offer.
Second, in all walks of life, customers know that you do not get something for nothing, and they will still want to shop around to check what is available.
Third, I believe that it will rapidly become market practice for the cost of packs to be deferred to the completion of the sale. The fee will simply be built into the selling price, with the legal and survey work being done on a no sale, no fee basis by the professions involved. Nobody should be paying up front.
Finally, if all it was going to take was £500 to retain customers next time round, would lenders not already be doing this? Most lenders still do not seem to put enough effort into retention activity – certainly compared with the money they throw at attracting new customers at the front end.
So while this will probably happen, it is likely to be a small feature of the market which will probably not trouble mortgage professionals in the longer term.
Big chain dominance?
The second concern that has been voiced is that the big corporate chains of estate agents will use their market position (and in one case the conveyancing factories and survey operations they own) to produce “free” packs for people selling houses through them.
Having captured the customer for the home sale, the mortgage requirement and related financial services sale would surely follow. So a reduction of business for independent estate agents and for independent mortgage brokers and financial advisers would follow.
I think this is likely to happen but I do not believe it will be significantly successful, for many of the same reasons as the lender initiative.
Customers really do understand that there is nothing free in this world. Natural scepticism by customers is that with any package deal, the better that one part of the offer is, the greater their suspicion is that they are being ripped off in another part of the package to make it up. So a seller's pack offered “free” up front could be recouped by a poor mortgage deal or expensive protection insurance? Customers would be rightly sceptical.
In addition, the reality of the estate agent market is that customers look to use the best agent to sell their particular type of house in their neighbourhood – the local agent who always sells the properties of this type, or who is recommended by friends and family, or who the customer has used before. Big firm initiatives have not proved hugely successful in the past, and a smaller, entrepreneurial local independent firm can normally run rings round the corporate chains any day.
Seller's packs do pose at least two realistic threats that mortgage brokers and financial advisers should be aware of and which they should be planning how to respond to.
However, equipped with good market awareness and by playing to their strengths of getting the best possible mortgage deal for a customer, they should have little to fear.