Hip, Hip, Hooray for the Property Industry
Whither HIPs? The great New Labour idea that was trumpeted as the next big thing, radical enough to transform the house buying market and protect purchasers on every rung of the property ladder has been watered down after pressure from the Council of Mortgage Lenders and the property industry more widely.
But now the Home Improvement Packs, which were due to be introduced in May 2007, while not totally scrapped will reach us in a much lesser form than was originally planned. HIPs lite, perhaps? Housing minister Yvette Cooper claimed further testing of Home Condition Reports was needed and that they would not be mandatory when HIPs are introduced in June.
Vendors will still have to provide legal documents and an energy report detailing the energy efficiency of a property, but will no longer be obliged to provide a survey or Home Condition Report (HCR), which was the largest and most expensive part of the document. This has reduced the cost of HIPs from around £1,000 to £200-£400 for sellers.
The Home Condition Report element of the Home Information Pack was a completely new report format which was developed by the Government. It would have covered the general condition of the property taking into account its age, character and location and highlight any defects requiring action. The HCR would have been a mid range survey similar in detail to the current Homebuyers' Survey and Valuation Report, but excluding the valuation.
Why the U-Turn?
The official Government line is that a lack of qualified housing inspectors to carry out the surveys is the reason behind the downgrading.
Leading players in the housing market, however, believe the real reason was because of fears that Hips could distort the housing market. How? Lenders and estate agents stoked fears that a glut of properties would come on the market in the run-up to Hip''s planned introduction in May 2007 as sellers tried to avoid the fees, prompting a housing slump immediately after that date. This, they claim, may have triggered a self-perpetuating downward spiral in prices that could have reduced the total value of Britain''s housing stock.
Consumer Response
While many in the property industry are pleased with the U-turn, consumer groups claim that the concession from the Government is bad for consumers who would have benefited from new transparency in the buying process. "This half-baked compromise will result in something of little value, but of real expense to consumers," said Nick Stace of the Consumers Association.
But what about the thousands of professionals who are halfway through their training to be home inspectors; 400 are already trained, with another 4,500 due to qualify soon. These people, who in many cases left other professions to be among the first to offer this service, paid up to £10,000 to become qualified to carry out the reports, resulting in even more competition for a piece of a smaller market than was first envisaged. That competition should be good for the consumer. Some companies trained to undertake the energy performance certificate are offering to do them for as little as £100-£150 and legal documents for £150-£200.
What is an Energy Performance Certificate?
The government is committed to comply with EU Directive 2002/91/EC which aims to promote improvements in the energy performance of buildings. The directive requires an energy performance certificate for all dwellings at the time of sale.
The certificate will give prospective purchasers an easy to read guide to the likely energy costs of occupying the property in a similar way that washing machines and refrigerators have an efficiency label. Improvement in the energy efficiency of our homes is therefore important in reducing our overall emissions.
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The overall cost for comparison is 7.1% APR. The actual rate available will depend upon your circumstances. Ask for a personalised illustration. There may be a fee for the mortgage advice. The precise amount will depend on your circumstances, but we estimate it will be 1.5% of the loan amount with a minimum fee of £500 added on to the loan.
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