If you look at the general reaction to trade bodies, then it is quite clear that they have an apprehension towards the transparency of lenders about the actual cost of valuations. Though the government has put utmost efforts in simplifying the charges, it is a fact that lenders are still quite skeptical about it. Experts say that since lenders keep a big margin with them under the heading administration fee, there is a tendency of keeping the things secret. Though the majority part of the fee should go to valuers, lenders derive methods of keeping some part of it as well.
In small lending businesses, it doesn’t make a difference, but in large lending, the difference is quite sizable. When the actual fee kept by the lender is different from the fee shown in the books, the gap is huge. Unofficial statistics reveals that in property dealing worth 200 Thousand Pounds, the surveyor margin reaches 200 to 250 Pounds which is handsome money. The lenders keep money in the range of 100 pounds for average property dealing. When valuation charges become at par to the survey charges, it is a general conception of customers that they paid for the survey. However, the situation is different actually.
Nobody denies the fact that lenders should levy the administration charges because they are in the business of lending. Keeping the top lines high should be the first and foremost objective. Having said it, the valuation fee charged by them shouldn’t grow out of proportion. If it leaves the actual fees behind, then it is an issue. This is exactly happening today, and it is the reason, consumers misunderstand about the dealings.
It is the right time to highlight the issue
The issue of consumers not declaring the actual cost of service becomes so prominently visible that it was discussed in the FCA Round Table conference last year. When experts discussed the ways and means of making the mortgage market further competitive, this issue came to the surface. Since the sharpest of business experts were there, they brainstormed each facet of it.
According to the reports, the major concern was about the difference between the valuation fees charged on paper and the actual amount received by the valuation agency. Since the valuation is done on the behalf of the customer, he or she should have sufficient rights to challenge the disparity (if any). Fairness of the fee is important to keep the credibility of the business.
The intentions aren’t wrong always
It is a fact that the intentions of lenders are not foul always. Sometimes, things happen just because of confusion and not to mislead. The important thing is that they should describe the fees in a consistent manner. Ambiguity and confusion raise the eyebrows of regulating agencies.
Here are some statistics of major lending companies:
- Lloyds Bank charges 350 Pounds, whereas transfers only 250 Pounds on the property worth around 200,000 pounds.
- Similarly, Royal Bank of Scotland charges 175 Pounds for standard valuation and 75 Pounds for administration charges for property valuating 100000 – 250000 Pounds.
- TSB charges 350 Pounds and it is not clear how much money is given to the valuation agency. The firm does free of cost valuation in some cases.
- HSBC keeps 35 Pounds as per reports.
- Barclays charges 190 Pounds but doesn’t disclose their share of the fee.
There are a few lenders that do not charge a single pound as valuation fee, provided the property value lies in the average price range.
The efforts to make it transparent aren’t sufficient
It is a feeling that there are many issues about valuation fee declaration and charging. Everyone in the industry wants to correct the situation, but it is a long-term process. Also, there are some unique issues also. Since there is no standardization of the heads, every lender has developed a different nomenclature. Some lenders call it application charge, some call it administration fee, and some name it service charges. Hence, both buyers and sellers are always in the confused state of mind.
The problem becomes further complicated as consumers get the invoice under the head of valuation fees. However, when they see the reports produced by the valuation agency, they do not find the fees in that. Hence, they consider the total amount under the head of the survey. Therefore, experts strongly feel that the rules and regulations should guide lenders for clearly mentioning the charges. Such enormous speculations and assumptions cause harm to the credibility of the entire property market.
CML says it is not possible to intervene in the issue
In the light of all the facts mentioned earlier, CML has a totally different opinion. Reports published in the year 2015 say that the administrative fees charged by the lenders and the actual cost incurred by them should be mentioned unambiguously by design. It can’t be by choice. However, the report reiterates that there is no measure to measure the cost reflectivity.
CML is a trade body and investigating cost reflectivity could be a sensitive issue. There are limitations because of commercial laws and competitiveness of the market. It can’t handle the confidential data about costs for their fellow members. The officials do not hesitate in declaring that assessing cost reflectivity is beyond their scope. They are not entitled to handle any such activity and issue should be taken separately and differently.
When thousands of people feel that the confusion should come to an end, it is certainly important that simplification in fees and charges become essential. A buyer or seller or anybody associated with the dealing should understand the charges at the first glance.
When comparison of mortgage fees, other charges, and valuation fees will become clear and transparent, it will deliver the best benefits to the customers. Experts underline the need of it for the long-term betterment of the real estate market in the country. Not only it will make the accounting fair and transparent, but help in managing the balance sheet as well.