Property appraisal discrepancies increase: Understanding the consequences when your mortgage lender and you differ on a home's value estimation.
Mortgage Valuers Perform More 'Down Valuations' Amid UK Housing Market Pressures
In the current UK property market, mortgage valuers are increasingly performing 'down valuations', leading to challenges for buyers, sellers, and those remortgaging. This trend is primarily driven by rising mortgage rates and borrowing costs, as well as market uncertainty and price adjustments.
Rising Mortgage Rates and Borrowing Costs
As mortgage rates have increased sharply due to higher gilt yields and Bank of England base rates reaching around 4% in 2025, lenders have become more cautious. This caution is reflected in the mortgage valuations provided by valuers, who are adopting more conservative property valuations to manage lending risks.
Market Uncertainty and Price Adjustments
Property prices in some areas have flattened or fallen slightly after years of growth, especially as affordability tightens with higher borrowing costs. Valuers reflect this cautious stance in their down valuations to align with realistic market values under current conditions.
Impact on Buyers and Sellers
For buyers, down valuations can lead to smaller mortgage offers than expected because mortgage lenders base their loans on the lower valuation, not the agreed purchase price. This often forces buyers to increase their deposit or negotiate the price down.
For sellers, down valuations may mean sales collapse or delays if buyers cannot secure the mortgage needed. Sellers may need to reduce asking prices or wait longer to sell at the desired price, affecting their plans and market confidence.
Market Impact
Increased down valuations can slow market activity as buyers struggle with financing and sellers adjust expectations, potentially leading to reduced transaction volumes.
Examples of Down Valuations
In one instance, a property valued at £1.7m was later valued at £2.8m by another valuer, resulting in a £1.1m difference. Another example involves a two-bedroom terrace in Ashford, agreed at £325,000, which was valued by a lender's surveyor at £290,000, despite three identical neighboring properties having sold for more in the preceding three months.
Call for Accountability and Impartial Appeal
There is a call for more accountability and means for impartial appeal in the valuation process. As valuers often assess properties without physically visiting them, instead relying on online research and local sales data, concerns about accuracy and fairness have arisen.
In summary, mortgage valuers perform down valuations more due to higher borrowing costs and cautious market assessments amid price adjustments. This impacts affordability for buyers and price negotiations for sellers, creating added friction in the UK housing market during 2025.
Financial Implications for Buyers and Sellers
For individuals focusing on personal-finance, these down valuations could require adjustments in savings plans to cover larger deposits or additional negotiation costs when buying property.
Role of Insurance and Investing
Given the unpredictable nature of property valuations, it might be prudent for individuals and businesses engaged in real-estate to consider insurance products to cover potential losses due to down valuations. Additionally, careful investing in the financial sector could provide opportunities during periods of market volatility.
Mortgage Securitization and Financial Institutions
Finance institutions dealing with residential or commercial mortgages should be vigilant about the surge in down valuations, as they influence the securitization of mortgage-backed investments and could impact their overall performance.
Policy Considerations
Government bodies might need to address concerns about impartiality and fairness in the valuation process. They could consider implementing stricter regulations, enhancing transparency, and offering avenues for appeals to protect both consumers and the housing market from potential misjudgments by mortgage valuers.
