THE COUNCIL of Mortgage Lenders and the Royal Institution of Chartered Surveyors are in talks about allegations of overvaluations on new-build properties.

This follows the decision by some mortgage lenders to pull out of lending on new developments.

The Mortgage Works, for example, will no longer accept any applications for buy-to-let mortgages on properties under a year old, citing an over-supply of apartments.

Matthew Wyles, director of The Mortgage Works, said some lenders were being ripped off: “The developer agrees to sell, say, a £300,000 property. The buyer obtains an 85% mortgage and borrows £255,000. On completion, the developer grants a discount of 15% and gives the buyer cashback of £45,000, leaving the lender with a 100% loan on the property.”

Lee Grandin, of Landlord Mortgages, said that buying offplan was a high-risk, high-reward strategy that could be dangerous in the current market, and said that investors should be wary of discounts and only do deals when the figures stacked up.