Personal Finance: Valuations for lenders

BEFORE long, home buyers will be given a breakdown of their mortgage valuation fee by their lender.

This will mean that a fee for pounds 120 might show pounds 100 going to the surveyor who does the work, with pounds 20 kept by the bank or building society to cover its administration costs.

This does not seem like a giant step for mankind. But it is the result of the 238-page report on residential mortgage valuations by the mighty Monopolies and Mergers Commission .

What it amounts to is a green light for much of the status quo - lenders increasingly using their own band of valuers, making the borrower pay for the survey that is for the lender's own needs and damping down any competition to provide surveys for buyers.

The misnamed 'survey' exists so that the lender can check the property is worth something like what you are prepared to pay for it, so that it can get its money back if all ends in disaster. Unfortunately around 80 per cent of home buyers rely on it as a check on the fabric of the property for their own purposes.

They really ought to be getting a home buyer's report, if not a full-blown structural survey, on what is likely to be the most expensive purchase they ever make. A property that passes the lender's test may not be up to scratch as a place to live and could end up costing the owner a fortune.

Home buyers are usually offered the extended survey as an add-on to the lender's survey. But any decent whiff of competition would force the lender to allow the buyer to take the initiative.

But there is a suspicion that an unhealthy relationship has grown up between surveyors who are part of estate agents, who in turn are kept on the books by lenders only as long as they keep a flow of mortgage applications coming their way.

The MMC held back from requiring lenders to accept surveys from any recognised surveyor. In spite of the fact that there are exams and professional bodies (RICS/ISVA) that ought to be keeping a check, the MMC felt that lenders ought not to be forced to use a surveyor favoured by a buyer.

The exaggerated fear of complex mortgage fraud means that buyers with an eye to having an economical report of the state of their intended home are forced to follow the lender's choice or pay twice over for an element of the work.

After that, being able to separate out the administration fee from the surveyor's fee is a pathetic sop.

WITH a pair of trousers what you see is what you get, so who cares how much the shop makes on the sale. But with a pension or endowment policy what you are buying is the hope that you will get a decent pot of gold in the end.

Unsurprisingly, one factor that determines what comes out at the end is what goes in - and if a chunk of the money you hand over to a financial adviser never makes it to the investment fund then there will inevitably be a smaller reward when the policy is cashed in.

Last week, the way that clients will have to be told about how much the salesmen gets and the way that this will effect the policy, especially in the early years, was spelt out. But the new regime will not start to bite until next summer.

The regulator, the Securities and Investments Board, would have us believe that the net result of all this is going to be a net saving of pounds 1bn a year as competition to show the smallest commission payments shaves back the take.

What a narrow view of the world. The financial world is much more nimble than merely to take a shade less commission. The most far-sighted life companies have been working on different systems of paying salesmen for years.

Instead of a chunky up- front payment it is likely that the pattern in future will be nibble-nibble all the way along. The absolute sums will not look so awful - much like quoting credit card interest rates by the month makes them seem quite cheap.

Investors are also likely to avoid the doubtful advice offered by salesmen and to go straight to the insurance company to negogiate a 'trade' discount.

If saving for a pension or to repay a mortgage means handing over chunks of cash to someone whose advice seems to favour the option that delivers the biggest commission then how much more appealing to go to a fee- charging adviser where you can feel that the advice is at least dispassionate - and then shop around for the best way of filling his prescription for your financial ills.

Accountants and solicitors whose advice is already reckoned to be worth paying for are likely to find that their financial advice business grows. The sooner there is a gulf between advice and products the better.