Chancellor George Osborne today cheered conveyancers by announcing in his budget dramatic new measures to boost the housing market.
A help-to-buy scheme is to be introduced for prospective purchasers struggling to find mortgage deposits.
This will include £3.5bn for shared equity loans, a government interest-free loan worth 20% of the value of a newly built home, and a new mortgage guarantee pot of £130bn to help people struggling to provide a deposit.
In a separate development, conveyancing solicitors in Scotland will vote on Friday whether to introduce separate representation in all conveyancing transactions. This would mean removing the current exemption to the conflict of interest rules that allows solicitors to act for both borrower and lender.
The move is a response to lender’s increasingly restrictive panel management, limiting the number of firms that can act for them.
President of the Law Society of Scotland Austin Lafferty said: ‘Changes in bank and building society’s practices have resulted in increased pressure and risk to solicitors in continuing to represent both parties.
‘In recent months the "sep rep" movement has grown, and increasing numbers of solicitors, although by no means all, are in favour of removing the exemption, meaning lenders would have to appoint their own solicitors, which immediately removes the risk to the buyers’ solicitors,’ he said.
Lafferty said that there would be ‘clear benefits’ to introducing the change, but he said there would also be ‘potential downsides’, such as increased costs and paperwork.
He said: ‘Given the increased pressures imposed by lenders on solicitors up and down the country, this is a crucial debate to have and it will be for our members to decide what they want to see happen.’
The Law Society of England and Wales believes separate representation is not in the profession’s best interests at this stage.
Last week, chief executive Desmond Hudson told a meeting of the Conveyancing Association that there was ‘no discernible benefit’ for solicitors in making the change to compel separate representation.
Requiring separate representation, he said, would give licensed conveyancers a competitive advantage over solicitors.
Any change to the rules made by the Solicitors Regulation Authority would not apply to non-SRA regulated conveyancers, who would be permitted to act for both parties, and lenders may seek to instruct them in order to limit the costs to buyers.
Chair of the Society’s conveyancing and land law committee Jonathan Smithers said that Chancery Lane had examined the issue of separate representation in detail in order to determine its policy position. This included a roadshow that sought the views of practitioners.
He said: ‘The regulatory environment and market conditions are very different in Scotland. These factors also impact the attitude of the lenders.
‘The Law Society continues to endorse joint representation for a range of reasons including providing the best value for money for the buying client.’
The Society warned last year that separate representation would be detrimental for consumers by increasing costs and introducing delays as two sets of legal advisers would have to look over the same work.
Commenting on the upcoming vote, chair of the Conveyancing Association Eddie Goldsmith said: ‘It’s a very different system in Scotland to that in England and Wales. What may be right there, may not be right here.’
He said the issue was ‘something of a curate’s egg’. ‘It’s good and bad in parts. On the one hand it may benefit lenders, who will be able to instruct the firms they want, but on the other, it could be bad for consumers, adding cost and delay.’
Goldsmith added that there is no fixed view on whether the move would tackle fraud, as some have suggested.
On the budget measures, Smithers said: ‘Anything that stimulates the housing market will be good news for UK Plc and for solicitors.’
Goldsmith said: 'We welcome the chancellor’s efforts to help reinvigorate the stagnant housing market through these measures. So far, all the government’s initiatives, whilst offered in the right spirit, have just not had much impact. These new proposals which combine more help for new homebuyers, with a significant underwriting of loans, may very well reachthose parts which other previous schemes haven’t.'
The Council of Mortgage Lenders said this afternoon: ‘To be successful the voluntary scheme will need to be robust, not overly complex, result in the delivery of products that are attractive to borrowers, and be commercially viable for lenders.
‘To achieve this, the scheme will need to ensure that all lenders will be able to gain capital relief in recognition of the risk mitigation offered by the government guarantee. Without capital relief, and depending on the size of the fee, the cost of the commercial fee that lenders will have to pay to gain the benefit of the scheme could make the scheme uneconomical.
‘Because it will take some months to design and put the scheme in place, the benefits will not be immediate.
‘However, a successful scheme could ultimately enable lenders to offer more low-deposit loans than they would otherwise be able to do without incurring concerns from funding markets, prudential regulators, or their own internal risk committees.’