UK Finance issues new guidance on new build home warranty standards

UK Finance has launched new guidance for warranty providers setting out the standards lenders typically expect from a new build home warranty. The guidance is designed to help ensure home warranties are sufficiently robust to satisfy lenders’ needs and protect home buyers.

The Consumer Code for Home Builders wants to see minimum level home warranty standards introduced to provide a good level of support for home buyers, as well as consistency in what can be a complex part of the home buying process. Although UK Finance cannot set mandatory minimum standards, this guidance is a positive step towards assuring a better standard of home warranty provision across the sector.

Noel Hunter, Code Chair, said: “Home builders, rather than buyers, choose which home warranty policy to provide, giving consumers little choice in what is a vital part of their new home purchase. Although most home warranty schemes, including those that support our Code, already offer a high standard of cover, there remains some concern that some schemes are not sufficiently robust, which is often only revealed when a claim is made. We are particularly pleased to see UK Finance setting out expectations that named insurers are registered with the Financial Conduct Authority (FCA) and Financial Services Compensation Scheme (FSCS).”

John Baguley, Principal, UK Finance, said: “Our warranty guidance has been developed in partnership with the industry to help home warranty providers understand and meet lenders’ expectations, reducing the risk of warranty standards holding up or blocking a mortgage decision. Complying with the guidance does not guarantee acceptance and each lender will continue to make their own assessment of what level of cover is acceptable, but meeting these expectations will help ensure essential elements are in place.”

Expectations set out in the UK Finance Warranty Guidance include:

• Full details of the named insurer(s) and their credit ratings
• The named insurer(s) must be FCA registered, covered by the FSCS and be a member of the Financial Ombudsman Service
• The new build element is built to Building Regulations and will have Building Regulations certification
• A final inspection of each complete property is carried out to confirm that it is finished such that it can be occupied by the borrower(s)
• Minimum cover of 10 years
• Warranty cover is automatically extended to all subsequent homeowners
• Where the buyer is not protected by a consumer code directly with their developer, the warranty provider is expected to offer a warranty linked consumer code, approved by the Chartered Trading Standards Approved Code Scheme

To find out more about how home warranty schemes protect home buyers, read our article on how home warranties protect your home.