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An increasing number of homeowners who remortgage are being forced to pay thousands of pounds more on their home loan due to the drastic reduction in the value of their properties.
According to mortgage brokers, adjusters have been more cautious in recent weeks and have reduced property valuations; one agent saw £50,000 take away from a £300,000 valuation.
This rise in prudent pricing has been driven by confusion about the future of home prices among lenders and potential buyers amid rapid fluctuations in mortgage rates, brokers warn.
Price uncertainty: Surveyors have been more cautious in recent weeks and have reduced property valuations.
It means homebuyers face the headache of their lender refusing to grant a mortgage for the agreed purchase price.
Meanwhile, those who need to remortgage could be forced to opt for products with a lower loan-to-value ratio, causing their interest rates to rise.
‘Downvaluations’ occur when a surveyor disagrees with the owner’s, or buyer’s and seller’s, opinion of the value of a property.
Broker Richard Jennings has seen an increase in the number of downgrades since December.
Until a few months ago, only between one and two percent of homes were undervalued; now, according to him, it is 15 percent for remortgage applications and 5 percent for buyers.
Graham Cox, broker at Self Employed Mortgage Hub, says: “This is happening now because we are officially in a recession and lenders are still nervous that property values could fall this year.”
Buyers and sellers are getting such conflicting signals about home prices that many offers are back at or near the asking price.
When a downward valuation occurs, buyers can raise funds to cover the difference between the mortgage and the sales price, ask the seller to reduce the sales price, or walk away from the deal.