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Why are equity release downvals happening at scale?

ended 18. September 2024

A couple of Newspagers have alerted us to the fact that down valuations are continuing to happen in equity release way more than in the conventional residential mortgage world. One conveyancer said: “We’ve got hundreds of offers just sat there no progressing due to down vals”, while a broker added: “I think every one of my equity release cases has been down-valued." Are you experiencing this and, if so, why do you think it's happening? 

4 responses from the Newspage community

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Simon Bridgland
Director at Charwin Private Clients
Down valuations appear to be happening more often now on lifetime applications, in part for good reason. The valuations submitted are often punchy, as currently so many borrowers have needs-based reasons for turning to equity release, with lots of applicants looking to repay existing mortgages and other debt. This means they need higher loan sizes to clear the debts, compared to someone who can select an amount based on preferred cost. If you have a set amount you need, you will push the valuation to fit within the loan to value limits for a given product. Lifetime lenders must keep lots of equity in the home to allow for the borrower not making interest payments.
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Gabriel McKeown
Head of Macroeconomics at Sad Rabbit - Substack Newsletter
The golden goose of retirement finance is laying fewer eggs as equity release property valuations come under pressure. The equity release market has struggled during this high-rate environment, with reduced demand from borrowers combined with more cautious lenders. However, with economic uncertainty still on the horizon, this may prompt surveyors to adopt a more pessimistic outlook on future property values. Furthermore, with stressed lending conditions, many providers are exercising greater caution in lending practices, which extends to valuations. The current wave of down valuations serves as a stark reminder of the interconnectedness of property values, economic conditions and retirement finance. Additionally, many lenders now offer protection against negative equity, an issue that has plagued previous generations of borrowers. This further reinforces the need for accurate valuations and may ultimately serve to strengthen the long-term stability of the equity release market.
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Justin Moy
Managing Director at EHF Mortgages
With Equity Release cases, it is typical for owners to have owned their homes for many years, and sometimes feel their assets are worth a bit more than the market suggests. They may have also asked a local estate agent for a valuation, which may be higher to try to win an instruction. But where you have the lifetime mortgage products priced in the current way, where the amount that can be borrowed is dependent on the value of the property, it's driving the behaviour to be positive about values, which can disappoint if surveyors are more conservative.
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Iain Swatton
Managing Partner at Later Life Property
The rise in down valuations across the equity release market is definitely frustrating, with little consistency in how properties are assessed. However, from a lender or surveyor’s perspective, it's a way to protect themselves, particularly with concerns around PI insurance. Unfortunately, I don’t see this trend changing anytime soon. The key is to manage client expectations from the outset, educating them on the possibility of lower valuations and ensuring there’s a solid plan A, B, and C in place to navigate these outcomes. It’s about being prepared and flexible in this evolving market.