Despite the positive trend in house prices over the first months of 2010, consistently low valuations have kept mortgage borrowers from seeing any actual benefit.
The Daily Mail has cited the example of a couple from South London, whose initial investment was ?176,000 when they bought their home four years ago. After a ?24,000 investment on improvements, estate agents valued the house between ?200,000 and ?216,000 in February this year.
When the couple wanted to remortgage in April, however, the surveyor from their bank valued the house at a maximum of ?160,000, considerably less than their initial purchase price. Having an existing mortgage of ?155,000, the couple?s application for a best-buy fixed rate was rejected because they did not have at least 20 per cent equity in their home.
This could create a number of potential problems in addition to the rising interest rate. If the owners in question cannot afford the repayments and try to sell, a low valuation could result in potential buyers also being rejected for a mortgage.
David Hollingworth from London & Country mortgages, said that homeowners do have some options if they are not happy with their valuation. They can, for instance, request an internal inspection, which may result in a higher figure. This is associated with a cost of ?a few hundred pounds? though, without any guarantee of a higher valuation.
Another strategy is to appeal by producing at least three examples of comparable local homes that sold for a higher price than the valuation. In general, valuations by estate agents do not carry much weight, as they are assumed to overvalue homes to gain business from sellers.
