Nationwide valuation based on their inaccurate House Price Index

girlynut

Our 5 year fixed rate with Nationwide is coming to an end and we've decided not to take out another product with them but simply continue on the variable rate as it is so low and expected to remain low for the next couple of years.

However, we had discussed switching to an interest-only mortgage for a year in order to pay off some credit card debt and have some extra disposable income for DIY projects / holidays etc.

Nationwide sent us the forms which we returned. Yesterday we received a letter refusing to let us switch to interest only as we do not have £150,000 equity, a fact we strongly dispute.

Our mortgage is £143,000. We bought the house for £250,000 in 2003. We moved our mortgage to Nationwide in 2007 when their desktop valuation was £285,000.

Using their House Price Index and inputting the 2007 value, Nationwide value the house at £276,000 today. Hence their argument that we have only £133,000 equity.

However, if you input the 2003 valuation the HPI calculator says the house is worth £330,000 today! So the calculator is inconsistent. I have also pointed out that we spent £50k on an extension last year which would have added value. Other similar properties in our street are going for £300 - 340k. Various pricing websites value the house at around the £310k mark.

Having complained to NW, they state that they value all customer properties on their HPI calculator and would only send a surveyor to re-value if we took out additional borrowing. I have offered to obtain our own estate agent / surveyor valuations but they refuse to accept these.

Before I escalate to FOS, I'd be grateful for any thoughts or comments. It just doesn't seem very reasonable to me, even if it is in their 'rules'.

Gary123456790

Hi,

Lenders usually take their latest valuation and then us HPI to fill in the gap until now, attempting to be as close as possible to "correct". I used to do loan exposure reporting for a small lender based on valuations vs loan amount and HPI will most likely show flat or slight decline for the last couple of years, depending on region.

They will not consider estate agent valuations as these are not a surveyor's valuation, and could be inflated to get your business so cannot be relied upon. 2007 valuations are highly likely to be inflated due to the 'bubble' and they will use the latest real valuation as a starting point anyway.

In reality they are just being conservative. The banking crisis was caused by too much lending and banks are now more cautious. They arent doing what you want them to do, but this in itself isnt really the basis for a valid complaint im afraid.

The extension wont really be taken into account unless a surveyor confirms what difference it has made to the value.

If you want to reduce your mortgage payment then one option is to extend the term so that you'll be paying a lot less capital off each month. Not quite interest only but close.

Thanks,

Gary.