Copy article

Brokers see rise in 'Doomsday' down valuations by equity release lenders

Journalist: Rohit (News Alerts)

ended 10. July 2024

Equity release lenders have been significantly downvaluing properties in recent months, brokers have reported. For example, one property was downvalued by nearly £60,000 despite similar properties in the immediate area being valued at the original value. In another case, a property was downvalued due to perceived flood risk, even though Environment Agency data indicated otherwise. These discrepancies highlight potential inconsistencies in the valuation process, which could have serious implications for those seeking to release equity from their homes.

One broker, Rita Kohli, said: "We've certainly seen an increase in down-valuations, even where there is evidence of a strong market. It's worse in areas with low sales activity, where we have seen valuations 20% lower than estate agent's valuations, even when the valuers are from the same firm. With the level of uncertainty on the economic outlook it's understandable that surveyors would take a more risk-averse approach, but too often we've seen almost a doomsday value being provided with little to no evidence to support it."

Another, Justin Moy, added: “This is similar to the issues within the buy-to-let market, with just a handful of surveying panels controlling the vast majority of mortgage lending valuation work. Too much power has been given to the surveyor firms.”

Newspage asked brokers what could be the reasons behind these downvaluations by equity release lenders, and what steps can be taken to ensure transparency and fairness in the property valuation process for equity release?. Their views are below.

Publishers: if you use any, or all, of the responses in this News Alert, please credit Newspage, e.g. "Speaking to the Newspage news agency, XXXX said...".  For ease, all, or individual quotes, can be copied.

5 responses from the Newspage community

Copy all

Star Quote
Copy

Editor
Rita Kohli
Managing Director at The Mortgage Stop
We've certainly seen an increase in down-valuations, even where there is evidence of a strong market. It's worse in areas with low sales activity, where we have seen valuations 20% lower than estate agent's valuations, even when the valuers are from the same firm. With the level of uncertainty on the economic outlook it's understandable that surveyors would take a more risk-averse approach, but too often we've seen almost a doomsday value being provided with little to no evidence to support it. The whole valuation process, in particular for later-life lending, needs more transparency, and given the nature of some of the later-life lending products, a more long-term outlook of market value should be applied. Valuers should provide their evidence and reasoning, which would make our conversations with people easier and lenders need to take a more common sense approach to their view on valuations.
Star Quote
Copy

Editor
Justin Moy
Managing Director at EHF Mortgages
This is similar to the issues within the buy-to-let market, with just a handful of surveying panels controlling the vast majority of mortgage lending valuation work. Too much power has been given to the surveyor firms. When mistakes are made, they don't wish to acknowledge shortcomings, and they have removed the appeal process through many lenders. There are plenty of good-quality data feeds that can provide information on flood risks, comparable prices and market trends, such as Sprift, and surveyors need to ensure that they don't impart their personal opinion over the statistical evidence.
Copy

Editor
Ben Perks
Managing Director at Orchard Financial Advisers
Down-valuations are an increasing trend and it’s not clear why. It’s probably a mixture of cautious valuers in uncertain times, the increased number of properties available and also lenders' desktop systems pricing in a house drop that never really materialised. Equity Release is often an emotional application process with a typically more vulnerable borrower. Complications during the process can be more upsetting than a normal mortgage case, so I hope this trend is short-term and corrects itself quickly.
Copy

Editor
Simon Bridgland
Director at Charwin Private Clients
Surveyors will look for a good level of comparable property completing on sales within the same area. If there isn’t anything really comparable then they will err on the side of caution. Certain borrower types can cluster in particular areas, leading to a low turnover of property, giving a low or non-existent level of comparable evidence. Lenders will also be reluctant to commit optimistic valuations on long-term loans with exposure to potential downturns or flat growth, especially whilst interest is being compounded on the loan and increasing risk of running into negative equity. Surveyors have various tools at their disposal as well as local knowledge to determine a property’s value, some of them looking into the future at things such as local plans, which will influence valuations down the line. Rather than giving a Caesar’s life or death thumbs up or thumbs down, surveyors could help by showing their evidence and reasoning. Some do, which helps, but most don’t.
Copy

Dan Osman
Head of Later Life Lending (Age 55+) at UK Moneyman
We have seen a number of downvaluations this year, primarily in urban areas with rural property holding up well and, in some cases, receiving a higher valuation than the client's estimate — a trend backed up by lender research. I think there is a fear of urban decline in many areas with local businesses failing first, leading to attractive communities becoming yet more dormitory suburbs. Simple interpretation, and unwillingness to re-examine, is a problem with houses close to rivers prone to flooding being declined despite being in such an elevated position that flooding of the property or its access would only result from truly biblical weather. The most common source of downvaluation we experience is due to poor comparables that don't take into account an individual property's appeal. Rarely can this be challenged due to the lack of available contradictory evidence but sometimes, common sense should prevail.