One in 30 homes are being downvalued by lenders - claim

Mortgage brokers have warned that an increase in downvaluations is starting to hit the property market.

Lenders and their valuers are cutting offers on around one in 30 homes by around £30,000, according to the reports.

It is being blamed on a lack of current data for property valuations and the time it is taking for sales to complete and be recorded at the Land Registry.

Chris Sykes, a director at mortgage broker Private Finance, told The Times: “We have seen a fair number of down-valuations recently, £30,000 or £40,000 here and there, although there have been a couple of larger ones.

“Probably about one in 30 loans are affected.

“The market is so busy and a lot of people are paying over the asking price, plus the sold price takes so long to make its way on to Land Registry records. 

“It can sometimes be nine months since an offer was agreed, so the valuers don’t have the data to go on. They tend to want to use sold data rather than what the estate agent selling the property says. It is also based on their opinions of the market.”

It comes as analysis from property buying company HBB Solutions last week suggested that almost half of pandemic property purchases across the UK last year would now have likely been downvalued.

The company used official data on the frequency of mortgage downvaluations during 2020 and applied it to the manic property market last year.

It found that Welsh home sellers are most likely to see their property downvalued, with industry figures showing that 63% of all property transactions will hit this pricing snag during their survey stage. 

The south east of England sits top of the table with HBB estimating that 129,394 of the 294,077 homes to have sold since the start of 2020 will have seen a down valuation. 

The north west is thought to have seen the second largest volume of downvalued property transactions at 118,694, with London the only other region to breach the 100,000 threshold at 107,168. 

Northern Ireland is estimated to have seen the lowest number of pandemic property down valuations, however, HBB Solutions still estimates almost 27,000 transactions will have been subject to a price reduction by valuers

Chris Hodgkinson, managing director of HBB Solutions, said: “Downvaluations can be an extremely frustrating part of buying or selling a property, especially when both buyer and seller have agreed on a price they are both happy with, only for the sale to be scuppered by a third party opinion.

Of course, in many cases these reductions are justified but in a market running as hot as we’ve seen during the pandemic, it’s not unheard of for lenders to influence this decision due to their own fears around escalating market values. 

“Unfortunately, there’s not a great deal that can be done to immediately remedy the issue other than the buyer coughing up or the seller reducing the asking price. 

“It’s hardly surprising that many sales, and the wider chains they sit within, can be jeopardised due to a down valuation.”