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Categories:Mortgages

Structural problems

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A dearth of surveyors and more use of automatic valuations could hit loans, reports Paul Thomas

The problem of attracting graduates to take up surveying as a profession could lead to borrowers paying more for their mortgage and limiting their choice of products.

The surveying profession acknowledges there is a dearth of new talent entering the sector. Statistics from the Royal Institution of Chartered Surveyors show there are 2,360 surveyors in the UK who specialise in residential valuations. e.surv director Richard Sexton says this number has fallen from around 3,000 in 2007.

RICs says the average age of surveying professionals, including students working towards their qualifications, is 49, highlighting the recruitment problems the sector faces.

Those with a RICs accredited degree have to undertake an additional two years of practical training before they can work in the sector.

In recent years, RICs has introduced associate membership for those without the relevant qualifications but with experience in the sector.

The associate membership route normally takes up to 12 months, depending on the candidate’s experience, knowledge and skills. Candidates complete an online portfolio demonstrating they meet all the skills, which means they are then able to carry out surveying work.

London’s Surveyors director Simon White says RICs should be doing more to promote the sector to graduates. He says: “I do not think RICs is particularly good at attracting surveyors to this sector. If you are leaving university, ready to enter the big, wide world, do you want to do a job that is perceived as merely sticking your head down a drain for the next 40 years? You are more likely to be seduced by sexy companies offering you things that sound a bit more interesting. Surveying is not promoted very well.”

White says this could lead lenders to increasingly resort to using automated valuation models. He says because these are less reliable and cannot check on the condition of properties, lenders will want to cover their backs by lending at lower LTVs.

White warns consumers will still have to pay a similar fee for an AVM.

He says: “When some of the specialist lenders moved further towards AVMs in the past, such as GMAC-RFC, which moved to 100 per cent AVMs for remortgages, a physical valuation was not required. Of course, that did not stop them charging a valuation fee and they charged the same fee they would if they were sending a surveyor out.”

Borrowers might also be penalised if their properties are valued more conservatively by AVMs.

Prolific Mortgage Finance managing director Lea Karasavvas says: “AVMs do not look at things which have been done to the property, such as extensions that have been added. It is really calculated on a square- footage basis and that is where it falls down and will result in severe detriment to the client.

“If an AVM is 2 or 3 per cent out on a valuation, then it might end up costing the borrower 0.2 or 0.3 per cent on a rate just because the property was not valued properly.”

Your Mortgage Decisions director Martin Wade says increasing use of AVMs over an extended period of time could compound the problem.

He says: “The fewer site visits carried out, the more unreliable the desktop valuation method becomes at all levels. Eventually, you will be doing desktop valuations on top of desk-top valuations. There must be enough primary evidence from which to base desktop valuations.”

London & Country head of communications David Hollingworth says: “The increased use of automatic valuations is inevitable but I see it being used more on lower-risk mortgages, where lenders are willing to rely upon an AVM as opposed to a physical valuation, particularly on lower-LTV mortgages.”

However Sexton says valuers will always have a significant presence in the market. He says: “There is definitely a problem in terms of recruitment but I do not think AVMs will replace valuers.”

Sexton says a smaller pool of surveyors will eventually lead to an increase in valuation fees, especially if the mortgage market makes a quicker recovery than anticipated.

He says: “If the mortgage market recovers quicker than we expect, valuation fees will definitely go up. We will get the opposite of what has been going on, where we have seen downward pressure on valuation fees from lenders. What could happen is the lenders who have pushed pricing down the furthest could be caught out.”

Brokers fear a shortage of professionals able to meet increased demand from lenders will also result in a fall in service levels.

If I Were You director Rob Clifford says: “I think at its simplest level it threatens to affect service levels. Will lenders be able to issue offers quite so quickly if surveying resources are so scarce?”

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