Inquiry launched into home-buyers' valuation fees: Monopoly investigation will focus on restrictions placed on choice for mortgage survey

THE WAY house-buyers are forced to pay for a valuation of their property before lenders will agree a mortgage is to be investigated by the Monopolies and Mergers Commission.

The Office of Fair Trading, which instigated the inquiry, has had complaints from individual valuers and surveyors, their representative bodies, and the public.

House-buyers have to pay for a valuation carried out for the benefit of the lender, which has to check that the property is worth at least the amount it plans to lend against it.

The chief complaint is that lenders only accept valuations from a limited list of surveyors. If a buyer wants to pay for a more detailed report on the state of the property, then a valuation for the lender's purpose can only be included if the surveyor is acceptable to the bank or building society.

Otherwise, the buyer will have to pay twice over - for the survey and a valuation.

A simple valuation which costs from pounds 90 to pounds 140 is taken by 82 per cent of borrowers; while 15 per cent take a house-buyer's report which looks at the structure of the building and typically costs pounds 150 to pounds 200; and just 3 per cent take a full structural survey which can cost pounds 300 to pounds 500.

Pamela Hirst, director of standards and practice at the Royal Institution of Chartered Surveyors, said there had been a marked reduction in consumer choice in recent years as lenders had cut down the number of surveyors on their panels as the property market slumped.

Many valuers work out of estate agencies. Ms Hirst admits that in some cases, deals are struck so that lenders only agree to put valuers on their panel who channel mortgage business their way, and estate agents direct buyers to lenders for whom they act as valuers.

Sir Bryan Carsberg, Director-General of Fair Trading, said: 'I am concerned that lenders have little incentive to keep down the cost of the service, because the cost is passed on. And I am concerned that borrowers have little opportunity to keep down the charges they have to pay because of restrictions on their ability to shop around.'

The Council of Mortgage Lenders said it believed the investigation would show that the procedures were prudent and reasonable.

Lenders will not usually accept a mortgage valuation brought along by a potential home-buyer. A CML spokesman said: 'Any lender accepting such a valuation would be surrendering control of a vital part of the lending process and exposing itself to an unacceptable risk of fraud.'

Lenders are also bound to follow guidelines imposed on them by insurance companies which insure them against losses on their mortgage business. They will frequently insist, for instance, that soleETHER write error practitioners are not allowed on the panel of surveyors because there is judged to be a greater risk of fraud.

The Consumers' Association said that the move was good news and was 'long overdue'.