Properties suffer ‘down valuations’ as banks fear house price falls
Lenders refuse to offer mortgages large enough to cover the agreed sales price
By Melissa Lawford
Banks and surveyors are “down valuing” as many as half of homes in some parts of the country amid fears sharp house price falls are on the horizon.
Home buyers have been left scrambling for cash as lenders have refused to grant mortgages big enough to cover the agreed sales price. Experts said banks were concerned the cost of living crisis would cause the end of the post-pandemic property boom.
Anthony Harris, of Continuum, a financial advice firm which manages over £1.53bn in mortgages and other assets, said: “I am seeing more than 50pc of purchase applications being down valued at present.”
This level is likely to rise further, he added. "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. But the lenders’ surveyors are not supporting the prices agreed."
When surveyors do not agree with the buyer and seller’s valuation of the property, the home is down valued. The prospective buyer must then pay the difference between the valuation and the agreed sales price in cash, or risk the purchase collapsing.
Mr Harris said a couple buying their first home in Berkshire had to find an extra £30,000 in cash. They had agreed to pay £430,000 for their property but their lender valued the home at £400,000. Another family buying a house in West Sussex agreed to pay £470,000 but had to find a further £20,000 after their high street lender down valued the property to £450,000.
Adrian Anderson, of Anderson Harris mortgage brokers, said: "I expect mortgage valuers will start to be more conservative moving forwards. The heat is coming out of the market and buyers are being a bit more restrained because of rising mortgage interest rates and the cost of living crisis.”
Property transactions are returning to pre-pandemic levels
Official figures released today show property transaction levels are slowly returning to pre-Covid levels as the rising cost of living cools the housing market – but experts warned there would be a steep decline in the months ahead.
There were 110,970 home sales in July, according to HM Revenue & Customs. This was 7.2pc higher than in June and 2.6pc above the five-year pre-Covid July average. However, experts said these figures reflected purchases that were agreed several months earlier.
Jeremy Leaf, a north London estate agent, said: “The market has moved on. Demand is still there but concerns about the rising cost of living and interest rate are prompting a more cautious approach.”
In the months ahead, transaction figures are likely to more clearly reflect the fact that runaway inflation, rising interest rates and soaring energy bills are hitting affordability, experts said.