Despite media reports of exploitative right-to-buy service companies, market analyst, Datamonitor, has reported opportunities for lenders in the sector. In its report Right to Buy Mortgages 2003, Datamonitor highlights the threat of companies exploiting the right-to-buy system and over charging. However, it also points to an expected compound annual growth rate of 5.7% over the period 2002-2007, making the market an attractive prospect despite ‘rogue’ traders.
The report said: ‘Given that right-to-buy service companies may ‘unlock’ a number of right-to-buy mortgage deals, lenders should ensure they are present on the panels used by reputable right-to-buy service companies. This is particularly the case for non-standard lenders as service companies will appeal most to those borrowers who believe they will experience greatest difficulty in finding a mortgage.’
The Office of the Deputy Prime Minister (ODPM), which prescribes the right-to-buy rules, pointed out that incentive companies, not service companies, are most guilty of exploiting the right-to-buy scheme, offering tenants a lump sum cash payment in order to gain ownership of a property. However, it still had misgivings. A spokesman for the ODPM, said: ‘The issue is that people can go to their Local Authority and have everything done for nothing, while some service firms have been charging quite large amounts of money. But, to be fair, we are talking about a minority of service companies that are a problem.’
Guy Batchelor, sales and marketing director at Platform, agreed with the reports findings. He said: ‘The companies we deal with are well run and Mortgage Code Compliance Board registered, and we also make sure that there is no excessive fee charging. However, there is a lot of hand holding involved in this type of business which justifies slightly higher fees.’