UK banks have withdrawn mortgage loans, and borrowers are not making payments. Lloyds and others have lowered their loan to value caps, while Nationwide and others have added restrictions to low-deposit borrowers and first-time buyers. Buyers without 25% (or greater) equity are essentially closed out of the market currently.
That’s if you can reach them at all. Vida Homeloans and Together Money have ceased all new mortgage lending. Those still in the business are barely answering the phones since the government said mortgage holders hurt by the coronavirus should be given a three-month respite from paying their mortgages.
Valuations have contributed to the real property stumble: Many analysts in the tangible property world have noted that the banks are liquid. Processing issues aside (call centres are closed and still struggling with work from home), there is also the issue with valuations—particularly as banks are forced to rely solely on inexpensive ‘desktop’ valuations.
Many of the bigger lenders have accepted those for smaller properties with low LTV rates. Others, such as lender more2life, have switched to ‘semi-automated’ valuation so surveyors would not need to visit the homes of potentially vulnerable clients. Legal & General has also stopped physical valuations. They can’t get valuers out for inspections, buyers can’t meet with property agents, and the risk reduction model for the mortgage market has stopped.
These lenders continue to rely on a combination of data from valuer E.surv, information about the borrower’s local area, and opinions from RICS-qualified surveyors.
This response offers two challenges for the profession. First, it reduces the quality of the appraisal. Second, lenders are being more cautious using this approach, adding restrictions around high loan-to-values or where nonstandard building materials are involved.
Some property types are being excluded, and some lending products have been withdrawn.
Business valuers would refer to desktop valuations as ‘calculations,’ and many BVWire—UK readers avoid them, citing IVS standards as applied to BV. Watching professional siblings from RICS or TEGoVA struggle to get their work accepted by banks and lenders is a lesson to us all—this, after all, is professional work product that wouldn’t withstand scrutiny in most business valuation settings.
We get what we pay for, in life and in business valuation. A business valuation prepared according to international standards by leading experts is worth the investment when value is uncertain and times are volatile, as they are now—and all parties must have confidence in the results.