It's time to move on: HIPs are here to stay
Home Information Packs may be a nuisance, but they are a fact of life
Saturday 11 April 2009
New laws which came into force this week will make it harder than ever for people to sell their homes. Despite much opposition, Home Information Packs (HIPs) are now a compulsory part of the home-selling process.
Rule changes which came into effect on 6 April mean that every home must have a HIP in place – not just ordered as has been the case up until now – before it can be put on the market.
A HIP contains detailed information regarding the energy rating of the home, Local Authority searches, evidence of title and "sustainability information", if the property is classed as a "new home".
But that's not all. Sellers are also now required to complete a Property Information Questionnaire (PIQ). This outlines pre-sale information such as the property's council tax band, parking arrangements, utilities and any structural alterations made to the property.
The new requirements will lead to expensive delays for home sellers, critics say. They are the culmination of a troubled passage to law for HIPs.
Originally a Labour manifesto commitment in 1997 and 2001, the so-called "sellers' packs" were designed to speed up the process of buying and selling homes.
John Prescott, who oversaw the policy development, heralded the pack, claiming it would transform the process, making it "easier, more transparent and more successful".
However, a key element of the pack, the Home Condition Report, became only a voluntary part of the pack in 2007. This followed widespread concern that what was effectively a seller's survey would not be accepted by any potential mortgage lender.
Despite opposition from many quarters – particularly estate agents – the Government has ploughed on with the HIP and today's home-seller needs to gather together an unprecedented amount of information.
This typically adds between £200 to £400 to the cost of selling your home, although some pack providers will allow payment to be deferred. While an estate agent is not responsible for the veracity of the PIQ, it is their responsibility to ensure it is included in the HIP.
The onus is on the sellers to fill it out themselves and to be "truthful and accurate".
A PIQ is typically about eight pages long and if the home being sold is a leasehold property, there are further questions to be completed. There are two types of questionnaire: one for newly-built properties and another for other types of property.
It is important to note that the information required on the PIQ only relates to the time when the seller has owned the property. However, if any of the information changes before the sale is completed, the seller is obliged to tell the conveyancer or estate agent.
So will the PIQ add further delay to an already convoluted process? Not necessarily, say the HIP providers, so long as the vendor completes the questionnaire.
The Association of Home Information Pack Providers (AHIPP) claims its members are currently turning HIPs around in an average of five days. But this is only possible if sellers play ball and complete the PIQ rapidly and allow energy assessors into their homes as quickly as possible, the Association warns.
The assessors have to complete an energy performance certificate which has been a requirement since October 2008 for any property being built, sold or rented. It provides ratings from A to G on the building, with A being the most energy efficient. The Government says the average rating is currently D.
Despite recent government research indicating that both sellers and buyers have largely been ignoring the HIP, Mike Ockenden of AHIPP argues that the questionnaire will significantly increase the number of consumers viewing the pack.
He says: "Providing simple, easy to understand, upfront information regarding a property will enable buyers to make a more informed decision, making them less likely to pull out later in the process. The PIQ will also raise consumer awareness and appetite for the HIP, as vendors completing the questionnaire are likely to request to see similarly completed forms for any properties they go on to view.
"The information required in the PIQ is already obtained from the seller in the present system, but much later in the sale process.
"There is nothing new, just different timing that makes total sense."
But critics argue that political dogma is behind the decision to continue with HIPs, despite their potential to further damage the property market. Louise Cuming, the head of mortgages at moneysupermarket.com, feels that HIPs have been a disaster from the beginning. She says: "In their current state HIPs are little more than an annoying, overly expensive delay to the process of selling a house. In short; more forms, more doubt, more delay – just what we don't need now."
The National Association of Estate Agents is calling on the Government to suspend HIPs in this month's Budget and re-examine their viability only once the recession is over. It recently revealed that 65 per cent of property professionals surveyed believe that the new HIP arrangements will actually discourage sellers from putting their properties on the market.
However, the fact is that the Government seems set to avoid yet another policy U-turn, regardless of the consequences. And even in the extremely unlikely event of HIPs being scrapped, the energy performance of the property would still have to be rated, as it is part of EU requirements to combat climate change.
So while HIPs look set to be another headache for property owners, anyone planning to sell their home should simply get their pack together as soon as they can to avoid frustrating delays.
Keep track of interesting mortgage opportunities
The Bank of England's decision to keep interest rates at 0.5 per cent this week was widely expected. But the Bank's lack of action should spur people with tracker mortgages into action, advises Ray Boulger of mortgage broker John Charcol. He points out that borrowers with tracker mortgages priced below the bank rate can expect to continue paying little or no interest for most or all of this year, or until the end of their deal, whichever comes first.
"Borrowers with tracker mortgages should take advantage of the windfall cut in their mortgage payments by using at least some of their extra spare cash each month to pay down their debt, starting with the most expensive, or putting the money in a savings account," he says.
He says the priority should be to pay back the most expensive debt. "After that, the mortgage should be reduced, subject to being able to do so without incurring an early repayment charge, unless the pay rate is so low that a better net of tax return can be obtained from a savings account," Boulger says.
"For example, there is no point in overpaying a mortgage on which no interest is being paid until the rate goes back up. The cash should be put into an instant access savings account and then withdrawn and used to reduce the mortgage when the cheap rate finishes."
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