According to research by HBB Solutions, sales subject to a down valuation are being devalued by 2.8 per cent on average. The current typical house price in the UK is now £286,397, leaving a £7,978 gap as a result of lenders viewing properties as worth less than the asking price.
This means sellers either have to lower asking prices or buyers must stump up the extra cash to close the gap.
With a typical 25 per cent deposit now standing at £71,599, the additional money could push the deposit to 27 per cent of a property’s value.
Regional differences
The East Midlands are where the largest down valuations are happening, with an average 3.3 per cent reduction accounting for a shortfall of £8,109. In the East of England, where the typical asking price is revised down by 2.3 per cent, this represents a cash gap of £8,090.
In Scotland, down valuations are worth an average of £8,089, which is a 4.3 per cent readjustment of the asking price. In Wales, this figure is £8,059 and in the South West, homes are being valued at £8,011 less than the asking price.
The down valuation shortfall is smaller in the North East, where buyers and sellers are left to renegotiate an average gap of £7,638.
Lenders getting cold feet
Chris Hodgkinson, managing director of HBB Solutions, said: “Down valuations are a worst case scenario for buyers and sellers who have already danced the dance to agree a sale price on a property. Unfortunately, they can be a common occurrence and one that is only going to increase as the market enters a period of heightened instability.
“What we’re currently seeing is that the market is starting to slow from a house price appreciation point of view. What we’re not seeing is recognition of these changing market conditions from the nation’s home sellers, who remain intent on securing the highest price possible for their home.”
He added: “At the same time, low stock levels mean that many buyers are still meeting them at this inflated price point in order to secure a home and before the cost of a mortgage climbs any higher.
“However, following a string of interest rates, many mortgage lenders are now starting to get cold feet and reduce their rate of lending in anticipation of things to come. The result of which is a far greater number of homes being subject to a down valuation and by quite a margin, leaving home sellers and buyers to go back to the drawing board in order to get an offer finalised.”
Back in June, Mortgage Solutions reported that down valuations had doubled since pre-pandemic and were likely to increase.
