The recovering mortgage market is coming under pressure from a declining number of surveyors, something which also threatens to damage broker relations with clients and even cause a bottleneck in higher loan-to-value mortgage applications.
Last week, surveyors warned of big delays in the house buying process and an increased use of less accurate desktop valuations if the sector is unable to attract new blood to match an expected increase in mortgage market activity.
E.Surv business development director Richard Sexton says surveyor numbers peaked in 2007 at around 7,000 and have since deteriorated to between 1,500 and 2,000.
Given that the Council of Mortgage Lenders estimates gross mortgage lending will rise from £152bn in 2012 to £156bn by the end of 2013, Sexton estimates a 20 per cent increase in the workforce is needed to cope with rising consumer demand.
He says: “We are in the middle of a perfect storm. There is definitely a supply and demand issue embedded in the market and I do not think there is any short-term solution. To deal with current demand, you realistically need another 20 per cent growth in the surveyor workforce.”
Hometrack chief operating officer David Catt says surveyors were forced to curb their numbers during the global financial crisis and cannot be expected to regain them in time to match an upturn in lending.
He says: “The concern for the surveyors is that, because they have reduced their capacity to match the demand, a small increase in volumes will disrupt the most efficient business models since they are built around the minimum number of people required. You cannot rebuild that capacity fast enough.”
Brokers have expressed their concerns over the difficulties this will present in regards to urgent purchases, particularly on higher LTV lending, as well as the increase in administrative work that are likely to be prompted by delays.
Mortgages for Business managing director David Whittaker says: “We are already starting to notice these pressure points. Periodic pressure points are becoming more frequent as the workload builds up for the valuers.
“What we are identifying are valuations not necessarily being done within service standard which either results in delays or the instruction is returned because they cannot do it within the time frame. This means it results in a longer process time overall which obviously has a customer service impact.”
John Charcol senior technical director Ray Boulger says the lack of surveyors may increasingly force brokers into a situation where they have to offer less suitable products to applicants just to compensate for a slower application processing rate.
He says: “The real problem is going to be on purchases and particularly where people need to make an offer quickly. One could end up in the situation where one has to tell a client that this is the best deal for them but it is going to take between three and four weeks to get an offer, partly due to the valuation.
“Alternatively, we can offer them another lender, resulting in a much quicker offer. The deal will not be as good but at least they will get a mortgage offer and they will not lose the property. It is arguably the lesser of two evils.”
Mortgage Advice Bureau head of lending Brian Murphy says this could develop even further to the point where brokers may find themselves having to operate within a priority system.
He says: “It might be realistic to have a two-speed surveying services distribution process whereby those borrowers who need a speedy response will end up paying more for their survey in order to get it back in a timely manner.”
The increased use of automated valuation models would go some way towards helping to ease this congestion, however, the models produce less accurate results than physical surveys since they are based on data on comparable properties in the same area and do not specifically take into account the condition of the property in question. Consequently, they are considered more suitable for lower LTV remortgages.
London and Country head of communications David Hollingworth says: “You may start to see AVMs being used in greater proportion on lower LTV remortgages but, based on the accuracy, I do not think you will see a massive shift back to automatic valuations for higher risk business.”
Trinity Financial product and communications manager Aaron Strutt says even if lenders are forced to use AVMs at higher LTV levels, past experience suggests intermediaries would find themselves having to treat applicants differently.
He says: “In the past, AVMs have always come back very low. Because there are so many different LTV bands now, a valuation which is down by just a percentage point or two will put borrowers in a different LTV band so they will typically end up paying more. If more AVMs go through, first-time buyers in particular will end up paying more.
“A slowdown in application processing could essentially result in a loss of business for intermediaries.”