Has the MMC missed the opportunity to transfer financial responsibility for mortgage valuations to banks and building societies?
Even during the housing market’s recent recession mortgage lending remained big business. In its recent comprehensive report* on valuations in this field the Monopolies and Mergers Commission estimates that in 1992 – a relatively stagnant year – new advances on residential property totalled £54bn. Although the lenders of this vast sum benefit from what is described as a “complex monopoly situation” the report concludes that arrangements for mortgage valuations do not operate against the public interest. Only on one point – the lumping together of surveyors’ fees and administrative charges – does the commission raise serious criticisms. The Government, quite rightly, has accepted the urgent need for action to ensure greater transparency in these figures, for non-disclosure only adds to the confusing choice of fixed and variable rate offers, over different terms, that borrowers currently face.
There will be many valuers, however – and not necessarily just sole practitioners – who will take a rather less sanguine view of the ever tighter monopoly being exercised by increasingly powerful groups as the amalgamation of building societies proceeds inexorably. Cheltenham and Gloucester’s willingness to be taken over by Lloyds Bank, together with the windfall payout to be enjoyed by the society’s investors, has altered the ground rules appreciably, and the competitive pace of mergers is set to quicken. Valuers in some smaller firms find their panel appointments cancelled, and even from those who retain their nominations come complaints of a dearth of instructions. An increasingly unhealthy situation may be developing in which work will be allocated (unofficially, of course) on the basis of an ability to generate reciprocal mortgage business for the lenders, leaving too many qualified and competent local valuers outside the charmed circle. The dangers of potential conflicts of interest which could arise when financial institutions own major estate agency chains offering packages of services cannot be lightly ignored.
As a borrower’s choice in valuation advice becomes ever more limited the question of why, tradition apart, he or she should be asked to pay at all becomes more pertinent. The building societies are legally required to obtain a valuation to ensure that the property in question provides adequate security for their loan. So why should they not foot the bill? Prior to 1981, when the Yianni case established a duty of care between the valuer and the borrower, the latter was even denied sight of the report for which he was charged. Surely it would be both clear and equitable for either the lender to pay for a straightforward valuation or, if the borrower opts for a homebuyer’s report or a full structural survey in addition, for the individual to pay an inclusive fee to a suitably qualified professional of his choice. Increasing competition between powerful mortgage providers may yet make this an attractive marketing option for premier-division building societies.
*The supply of residential mortgage valuations (Cm 2542, HMSO)
