How do mortgage lenders determine house prices?

bonehead13

Hi
My Northern Rock fixed rate mortgage ends Feb 09 and I'm trying to plan ahead, should be able to arrange a remortgage in October at the earliest but I'm concerned about the LTV %. We bought the house for £248k in June 2007, it was a good price and about £20k less than similar properties have sold for since. We've also done a lot of work to it and reckon it's now worth approx 290 - 300k. My query is regarding how the mortgage company (or whoever they use) work out the value of a property. If they simply use land registry data and then work out a figure based on average house price trends since the last sale, then this would mean it would be valued at a lot less than it's true worth, given the bargain price we paid and the subsequent improvements we've made. Then we'd struggle to get a decent mortgage as the LTV % would be higher. Or, as im hoping, do they actually price properties in the same way as an estate agent would? Any info much appreciated, please forgive me if the answer is obvious as I've had a good search round and can't find a clear answer
Cheers

Gailk

We're remortgaging at the minute and they sent a valuer out to revalue our house. I think depending on how old the house is, they sometimes don't though I'm now expert!

minimike2

Some lenders, like the rock and halifax, have thier own house price index. Some will go on land registry, some will re-value.

I am always wary of the house price indexs tho. Two real life examples I have relate to Northern Rock, who valued one of my clients propetries at £230k, when two independent valuers valued it at £200k, and on my own property, Halifax value at £145k, and two independent valuers value at £160, so the lenders can be way off in both directions.

bonehead13

Thanks for the info - we're hoping to get a 60% mortgage and we need to remortgage £180k. 'We think'(!) the house is worth close to 300k so even if a valuer does come out it will be a close call!

headoutthesand

My mortgage is with Halifax and they last valued my house at £88,000 despite my neighbour selling their exact same house for £90,000 last year and my neighbour across the road selling theirs 3 weeks ago for £110,00 when they have a smaller garden and no off street parking which I do have

EdInvestor

The surveyor who does the mortgage valuation is paid by the bank, so he will likely tell his customer something approaching what he wants to hear.At the moment they want to hear low valuations.

It may be wise to commission your own independent valuation from a surveyor and also get a couple of estate agents around to value your property if you feel you are likely to have a problem.Also check on nethouse prices etc.

I've heard of cases where BTL investors have successfully fought ridiculously low valuations.The system at the moment is undoubtedly not objective, and open to abuse.

Anne3333

I work in the mortgage industry, please bear in mind that lenders will only accept valuations from their own select panel of surveyors, so there is absolutely no point in commissioning your own valuation. This will cost you money and is unlikely to be acceptable to a lender!
Please also bear in mind that estate agents are likely to over-inflate your value, in the hope of achieving your business. Their valuations should be taken with a pinch of salt!
Valuers work for the lender and NOT you, it is their job to give a valuation that will not present a 'risk' to their clients, the lenders. We, in the industry, strongly suspect that valuers are deliberately undervaluing property to insure the LTV (Loan to Value) is less risky to the lender.
There is also the case that when lenders have to repossess, and do not get back their full advance from the mortgagee, that they have been chasing the surveyor and accusing them of over-valuing. Hence it is again in the surveyors interest to keep the value low to cover themselves!
It is upsetting, but time and time again, we are finding that the client is paying good money for a mortgage valuation, only to find it being vastly undervalued.
It is the lenders greed that has got us into this mess, but who is paying for it??? YOU!!!

EdInvestor

Anne3333 wrote: »

I work in the mortgage industry, please bear in mind that lenders will only accept valuations from their own select panel of surveyors, so there is absolutely no point in commissioning your own valuation. This will cost you money and is unlikely to be acceptable to a lender!

Of course it has always been in any buyer's interest to commission an independent survey (including a valuation) when they buy a property. Relying on the lender's survey/valuation is quite risky.

Valuers work for the lender and NOT you, it is their job to give a valuation that will not present a 'risk' to their clients, the lenders. We, in the industry, strongly suspect that valuers are deliberately undervaluing property to insure the LTV (Loan to Value) is less risky to the lender.

Indeed so, about time people started to make their views known, for which they need some countervailing eveidence.

There is also the case that when lenders have to repossess, and do not get back their full advance from the mortgagee, that they have been chasing the surveyor and accusing them of over-valuing. Hence it is again in the surveyors interest to keep the value low to cover themselves!

This is pretty ridiculous since they usually send repos to auction where for sure they will get sold for 30% off.

It is upsetting, but time and time again, we are finding that the client is paying good money for a mortgage valuation, only to find it being vastly undervalued.
It is the lenders greed that has got us into this mess, but who is paying for it??? YOU!!!

So the time to start complaining is now.

Leon_W

Hi Ed

The OP is on about remortgaging so Annes point was valid, commissioning your own valuation would be a waste of time.

Just guessing you missread the post.

Regards