There has been a lot of talk of rising mortgage rates, but homebuyers also need to watch out for increases in down valuations, according to national IFA firm Continuum.
Wednesday’s house price index figures from the Office for National Statistics showed a 12.8% increase in house prices in the year to May 20221.
However, many surveyors working for mortgage lenders have not followed suit, according to national independent financial advice firm Continuum.
Several of the mortgage specialists at the firm have seen an increase in the number of down valuations by surveyors in recent months.
As a result, borrowers are either having to renegotiate the offer price or make up the difference from their own resources.
Anthony Harris (DipPFS ER CeMAP), Independent Financial Adviser at Continuum, said: “I have seen over 50% of purchase applications being down valued at present, with the expectation this could rise before it falls. Sellers are asking high prices and there always seems to be more than two buyers who are prepared to enter a bit of a bidding war, pushing up prices further.
“Plenty of purchase applications are seeing buyers being pushed higher and higher with their offer, as they try to secure the property, but the lenders’ surveyors are not supporting the prices agreed.
“This means either the price has to be renegotiated (which is not always as straight forward when there have been a number of potential bidders) or the applicants having to make up the difference from their own resources.
“A down valuation can be a particularly large hit where applicants have been seeking a high loan-to-value mortgage – the lender will always base their loan on the lower figure.
“However, a down valuation certainly doesn’t have to mean the end of a deal. We generally find a solution, whether that be alternative financing or a renegotiation of price.”
According to property portal Rightmove, property asking prices have risen 9.3% in the 12 months to July to a record average of £369,9682.
Continuum’s mortgages team have reported seeing a growth in down valuations since January, with no sign of the trend disappearing.
Martin Brown, Managing Partner at Continuum, said: “At Continuum several of our mortgage specialists have reported seeing down valuations across the board since the turn of the year, for all types of property and all regions of the country.
“Most buyers still seem prepared to pay whatever it costs to secure a property, which is keeping prices high.
“This is where an independent financial adviser such as Continuum can really add value, due to our experience and breadth of our professional offering. By managing client expectations from the outset and delivering a full end to end solution for clients, we are able to keep the vast majority of deals alive.
“We certainly haven’t seen any drop in enquiries, with many repeat customer enquiries and happy client recommendations as a result of helping buyers navigate through minefields such as down valuations.”