Stacey Bell is thrilled with the incentives offered by Fairview New Homes at its Modus scheme in Ipswich ? they helped her to buy a one-bedroom flat there and become a homeowner at just 19. "I paid £110,000," she says (her father kindly went guarantor on her loan). "But the developer paid my 5% deposit for me, gave me £1,000 cashback and furnished the property with £5,000 worth of goods. It came with linen, cutlery ? even a cheese grater."
Rather less pleased about the growing tendency of developers to entice buyers with thousands of pounds’ worth of goodies is the Council of Mortgage Lenders (CML). The mortgage industry’s trade body has declared war on the practice, complaining that incentives are distorting the new-build market and putting lenders at risk of losing money if borrowers default on repayments.
When a buyer applies for a mortgage on a new-build home, the lender values the property according to the prices fetched by other units in the same and similar local schemes ? all information recorded in the Land Registry. However, the stated sales prices, which are recorded on the contract and then on the registry database, often fail to reflect any incentives offered, giving a distorted impression of the local market.
In Bell’s case, the value of such enticements was £11,500 ? so really she received a 10% discount on the official price. The practice reflects the difficulties that developers are having selling in areas where there has been an overenthusiastic building boom. In one scheme down the road from where Bell bought in Ipswich, a repossessed two-bed flat has sold for £140,000 ? it had cost £279,950 when new 15 months earlier. |
