Aug 15 – “Are free legals and valuations a good idea?”

There is no such thing as a free lunch is a phrase often quoted, and I consider that free legals and valuations offers from some lenders fall into that same pot. As firms of all types compete to win business, the price to the consumer is often used as the competitive lever. As an industry therefore we keep devaluing the professional skills and services we provide. The importance of the valuation even if just for mortgage purposes is fundamental to the loan to value calculation and therefore the pay rate of the loan. This requires professional skill, knowledge and judgement which should be appreciated by all in the chain. Selling this as a freebie does our sector no good.

The legal work similarly should not be clouded by marketing a free service to consumers that diminishes the importance of the legal work. Where this is applied there should be clarity about who the solicitor or conveyancer is working for. Consumers might have an expectation that this is operating for their protection when in fact the free service is actually the agent of the lender. This cannot be a satisfactory place when dealing with the largest asset most people ever own and needing an adequate explanation of both the legal documents they are asked to complete and hopefully a proper explanation of the lender’s terms and conditions and the limitations and restrictions that might form part of the mortgage agreement.

My main concern is that anecdotally my members tell me that those who accept the “free” offers end up at the back of the queue, or with the less skilled firms. This cannot be in the best interests of our customers or the industry as a whole. We are all working hard to restore a tarnished reputation and this does not help. Cash-back offers that allow the customer to go where they want to, or their advisers recommend are a better option, if this solution is really required. But surely we should all accept that these offers are factored into the price of the loan somewhere, so these gimmicks provide no benefit in the longer term.