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In the past I have been critical of the marketing by lenders of “free valuations” and “free legals”.  News is reaching me again of significant delays in purchase and re-mortgage cases as the service provided through some conveyancers are at crisis point.  I remain confused as to how this can occur.  The lender offering the incentive must know the volume of business they are looking to attract and should have planned with their supplier that they have appropriate resources.  That we end up with the customer, broker, lender and conveyancer all involved in chasing and frustrating phone calls is a total waste of time, emotion and resources.

I have always considered these incentives as a potential conflict of interest.  A valuation is never free, as the lender will be paying the surveyor because they will want to rely on that to indemnify their loan.  It is also for the lender not the customer and should be more transparent as such so the customer understands it is just to underpin the lending decisions and should not give them comfort as to the whether the property is worth the amount being paid.

Similarly, where the lender is selecting the conveyancer, they are conflicted and there has to be clarity is whose interest the “solicitor” is acting.  Always better has to be a “cash back” offer to fund the legals.  Where we keep having the recurring nightmare of conveyancers caught in delays so seeing customers reverting to SVR in their existing deal or risking missing exchange and completion, the compensation risk must sit with the lender who has incentivised this poor outcome.

In making the constructive risk decision to offer this incentive any regulated entity has the be in proper control of its delivery chain.  I hope those lenders looking to augment their product with add-ons work a bit harder to ensure that the incentives work as such and not against the customers best interests.

Robert Sinclair, AMI
November 2019

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