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Nearly half of buyers have potential home ‘downvalued’ after agreeing price

Christina Hoghton
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Christina Hoghton

A down valuation can affect the size of mortgage you are able to get, preventing the purchase from progressing

A large proportion of buyers (46%) have had their prospective property down valued by their chosen mortgage lender, according to Bankrate UK.

The mortgage comparison service surveyed buyers and prospective buyers across the UK to analyse how lender uncertainty is affecting the market.

The results also revealed that homes valued between £400,000 and £500,000 seen the greatest devaluations. And younger buyers are being hit hardest – 50% of buyers aged 18-34 received a down valuation, in comparison to 37% of buyers aged 45 and over.

What is a down valuation?

If you buy a home with a mortgage the lender will insist on its own valuation to confirm the property’s value.

A down valuation is where this comes in below the price agreed by the buyer and seller.

It can be a problem for the lender if the buyer doesn’t have a significant deposit because it reduces the buyer’s equity stake – which is the lender’s safety net for the property they are lending against.

A down valuation can stop the whole purchase going ahead if the buyer can’t or won’t increase their deposit and the seller won’t budge on price.

Sam, a 30-year-old software engineer from Essex, said: “In August I attempted to buy a semi-detached property in Billericay Essex for £450,000. My offer was accepted by the seller but following a survey from my mortgage lender, the property was devalued by £50,000.

“As the seller was unwilling to reduce their asking price, I subsequently lost the mortgage offer and the property, as I was unable to increase my house deposit to cover the cost of the devaluation.”

Where is this happening?

Buyers looking to purchase properties in Wales had the highest percentage of down valuations at 63%.

Next was London, where 59% of properties were deemed less valuable by lenders.

In the South West however, homes have held onto their value the most, with 74% of properties holding their value through to completion.

Almost half (44%) of homes include in Bankrate UK’s investigation were down valued between £5,000-£10,000, while a quarter of buyers said their properties were down valued between £10,000-£20,000.