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BillyShears

A Potentially Much More Efficient Model For Hips

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Everyone seems to be saying that one problem with HIPs is that they won't necessarily be accepted by mortgage lenders. So any purchaser needs to do their own survey as well, making the HIP a cost increaser not a cost decreaser.

Here's one alternative model for how HIPs could work that I think might make the property market more efficient. What would happen if mortgage lenders such as The Halifax, Nationwide, ad infinitum, started up their own departments to offer HIPs. Then, if The Halifax was the company that created the HIP, they would then say up front that they are prepared to accept their own HIP for a mortage. This would mean that when someone bought a house which had a Halifax HIP, they would know that if they arranged a mortgage with the Halifax, they wouldn't have to get their own survey done. When making the HIP The Halifax (or other) could include any additional information required for mortgage purposes over and above what has to be in a HIP. They could then also say how much they would be prepared to lend on the property (subject to credit etc. checks). So, the potential purchaser would not just not have to pay for their own survey, they'd also have a very good idea about whether they could obtain a mortgage for the amount they need to purchase the house. It might become a selling point for houses, e.g. "Nationwide HIP" in the property descriptions on rightmove.

The mortgage lender could go all out in the HIP report (if it's legal to attach this information) saying what sorts of interest rates and payment plans it could make for that particular property given different amounts of deposit. Etc.

One problem would be that some organisations may become "HIP parasites". E.g. a small building society may say that they are prepared to accept HIPs created by Halifax, Nationwide, etc. However, since the semi "pre-approved" status of the HIP might be a competitive advantage, perhaps they could be sold at market rates, not as a loss-leader. So the cost to the mortgage provider would be nothing really. I'm sure that HIPs "pre-approved" by particular mortgage providers would be a strong marketing tool for that provider, particularly if additional information is attached with mortgage plans tailored to that property. I'm sure that reasonable mortgage plans could be created by computer given a few basic facts about the property, meaning that they would cost next to nothing to create.

This would also help with property auctions, as in the other thread on HIPs and property auctions. If there were such semi-"pre-approved" HIPs, then they would make houses much easier to auction than at present as the buyer could be confident in the condition of the house and be much more confident that a mortgage can be arranged quickly and easier. Perhaps buyers could be "pre-approved" to some extent so that if a buyer approved by Nationwide buys a house with a Nationwide HIP, the mortgage can be agreed automatically by computer within minutes.

Edit: As a quick followup, we've heard that mortgage lenders may not accept HIPs. But, even if mortgage lenders don't start offering their own HIPs, if one mortgage lender started accepting them, wouldn't that give them a big competitive advantage in the market? And if that was the case, wouldn't the other lenders have to follow suit or miss out?

Billy Shears

Edited by BillyShears

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I think this will be the reason HIPs will work in the long term.

The mortage company doesn't need to do the HIP themselves. It could be done buy a approved company. So you could get a HIP that has been approved buy nationwide and Halifax. These HIPs may be more expensive, but will end up being a selling point.

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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