Brokers are being hit by a wave of downvaluations on residential and rental properties that have led to borrowers missing out on mortgage deals.
According to mortgage advisers surveyors are making significant mark-downs on the value of properties compared to the agents’ prices, which can affect the amount a client can borrow and lead to transactions breaking down.
While brokers experience downvaluations on a regular basis, the number of properties having their price marked down has risen significantly in recent months.
And while brokers can appeal against the decisions, or try to find another suitable property for the buyer, doing so can be time-consuming and is now at a time when many lenders are increasing mortgage rates as they expect the Bank of England to increase the base rate.
Matthew Fleming-Duffy, director of Bournemouth-based Cherry Finance, said almost a fifth of his current cases had been affected by the issue.
He said: “We have got 10 cases at the moment where their valuation has come in low or the rental figure has come in less than expected, or they are saying this property is just not mortgageable full stop.
“We are a small firm. For us, it has become a problem."
Mr Fleming-Duffy said one letting agent had confirmed a property had a rental income of £2,150 a month, but the surveyor subsequently valued it at £1,800 a month.
“It dropped the maximum loan by just over £40,000,” he explained.
He added that other properties had been unexpectedly declared unmortgageable because the surveyor ruled the borrower would be unable to re-sell it.
Oliver Marley, mortgage adviser and head of research at London-based Independent James, said: “I’ve seen a fair few downvaluations recently.
"Overly cautious is my view, but it’s understandable given that there’s a lot of uncertainty and negative press.
“Everyone seems to be on edge, but I’m more optimistic about London to be honest. Things have certainly slowed but demand is still outstripping supply.”
Several brokers suggested surveyors were responding to different guidance from the Royal Institution of Chartered Surveyors (Rics).
But a spokesman for Rics said: “Rics has not changed valuation advice. A chartered surveyor values in compliance with the Rics Professional Valuation Standards 2017, often referred to as the Red Book.
"The Red Book articulates both technical and ethical standards Chartered Valuation Surveyors must meet and by which Rics proactivity monitors members’ performance against through Valuer Registration.”
Halifax, Leeds Building Society, the Royal Bank of Scotland, Barclays and Yorkshire Building Society said they had not made any changes to their criteria that would account for the changes.
Buying agent and market commentator Henry Pryor said the downvaluations were happening due to “fear of a falling market”.
He said valuers put their professional reputation on the line and risk being sued by lenders if they are wrong, suffering a consequent hike in their professional indemnity premiums.