Your Money: Buyer beware of the agents

A CUT in interest rates, courtesy of the ERM, the Christchurch by-election and signs of a faltering economic recovery, should do no harm to the housing market.

However, there is a puzzling lack of real activity in the market, given the depth to which mortgage rates have already sunk.

One of the problems is the arguments raging between lenders, vendors and buyers over the real value of houses.

Buyers and sellers are striking deals only to find that a surveyor values the property far below the price agreed. Sometimes, this means buyers cannot raise the mortgage they need. Even if the loan is no problem, what buyer wants to go ahead with a purchase in these circumstances?

A reader offers an insight into this phenomenon. She recently offered pounds 97,000 for a flat in a sought-after part of north London - about pounds 12,000 less than the asking price. 'Pleased with my bargain, I arranged a mortgage, paid for a survey and search and went on holiday excited at the prospect of owning my own flat.'

She returned to discover that the mortgage valuation came in at pounds 74,000. She was only seeking a pounds 40,000 mortgage, but even so was not prepared to pay over the odds.

The owner of the flat trotted out the now-stock explanation that surveyors are deliberately undervaluing flats for fear of being sued later by loss-making lenders that have had to repossess. 'Wrong', said another local estate agent approached by this woman when she went back on the road in search of a new property. Estate agents were deliberately misleading surveyors when they telephoned for estimates of local values. 'The agents try to sabotage each other's deals.'

David Goldsworthy, president of the National Association of Estate Agents, admits it is not unknown for agents deliberately to mislead competitors over prices - al though, of course, no reputable agent would get up to such tricks.

The only way buyers can defend themselves against dishonest agents and green surveyors is to pay for a second valuation. It may pay for itself in a keener deal, but it should not be necessary.

ABBEY NATIONAL is in a pickle over charges. Just a few weeks ago, the building society turned bank said it was planning to start levying charges on current account customers who did not keep balances above a certain level.

Now Abbey says it never intended to introduce charges on existing accounts; it only ever planned to launch a new account with charges. But it has put that idea on hold, too. It looks very much like Abbey's 1 million current account customers - many of whom were attracted away from the traditional banks by the lack of charges and interest paid on balances - have raised merry hell.

But it has not shelved the charging issue indefinitely. And with interest rates on the way down again, Abbey and all its banking competitors will be complaining louder than ever about poor returns on their current accounts.

Abbey is expected to report half-year profits tomorrow of around pounds 300m, 11 per cent higher than for the same period in 1992. Charges may well be necessary to help protect profitability in the long term, but now is not the time to sell the idea.

LIFE insurance salesmen are not the only members of the investment industry who pay for their bread and butter, if not their swimming pools and Porsches, out of commission earnings. A battle has been raging in the unit trust industry over the way one unit trust broker, Chelsea Financial Services, has been selling personal equity plans from a leading fund manager, Perpetual, at a 4 per cent discount.

The going commission rate on a unit trust, and a unit trust Pep plan, is 3 per cent, extracted from front-end charges of 5 per cent or more.

Chelsea alleged that other brokers had put pressure on Perpetual to withdraw facilities for discounting.

Perpetual denies that it acted in concert with other parties.

Now the Office of Fair Trading has warned the unit trust industry that it would take a dim view of efforts to freeze out discount brokers.

Unit trust charges are at least transparent, unlike life insurance charges and commission.

But coming so quickly after the Treasury's announcement that commission must be disclosed on life insurance products, the OFT's intervention on unit trust discounts will add to pressure for greater competition and a move away from this form of remuneration .