Despite a number of lenders recently making reductions as swap rates stabilise, many experts still predict downward pressure on house prices as higher mortgage rates and tougher demand takes its toll.

While many experts agree on potential challenges for house prices in the future, there isn’t much of a consensus just yet. Zoopla said it predicts prices will fall by 5% in 2023 – a view shared by estate agent Knight Frank. But as Zoopla pointed out, this would still be 15% higher than pre-pandemic levels.

Alternatively, analysts at Capital Economics predict prices will fall by 12% by mid-2024, while a  report from the Resolution Foundation think-tank set expectations at 25% over the next five years. There’s plenty more ranging from small corrections to more significant drops.

If it’s this hard for those close to the market to make sense of it all and come to a consensus, just imagine how Mr and Mrs Jones must feel trying to buy or sell a property.

Making informed decisions

As we see volatility in the market, understanding value and identifying any potential risks has to be a key consideration. That’s especially true for lenders or funders managing a property portfolio or a hefty mortgage book.

Over the past decade, lenders would have watched as property prices rise and the value of their books appreciate. Now, we could be returning to a period of sustained pressure on prices, causing book values to depreciate.

While strong employment levels are helping to stave off any significant rise in arrears, any substantial depreciation could push customers into debt and leave them at a detriment by staying in the property. This risk is particularly pertinent as Consumer Duty comes into force.

Without up-to-date intelligence, it’s impossible for lenders to protect the value in their security and to ultimately make informed decisions. However, for those with sizeable books, securing this information can be an onerous task.

Understanding the asset

As with many other areas, innovations in technology have helped deliver greater efficiencies. Tools such as automated valuation models (AVMs) help deliver an economy of scale, utilising algorithms and accurate market data to generate bulk valuations. While this is a fantastic way for lenders to value their portfolio quickly, it only provides part of the information. To get a more complete picture, lenders should also implement drive by valuations to get eyes on the asset, assess its condition and understand any risks posed.

These can be completed across the UK and the Republic of Ireland on both residential and commercial properties, helping lenders see exactly what they are dealing with and any potential challenges.

Lenders can complete this process as frequently as required based on their portfolio or their appetite to risk. Some may choose to review properties every few years, while others may look to review a proportion of the book every quarter.

Having this information at their fingertips means lenders can then drill down into the detail, assessing different property types and different localities with a real scientific viewpoint. As a volatile market forces lenders to stay closer to their clients and their mortgage book, accurate intelligence will play a critical role in identifying potential risk. By outsourcing this onerous task, lenders can also receive support when exiting a loan is the only viable option, achieving a suitable sale price and outcome for all involved.

David Miller is divisional director at Spicerhaart Corporate Sales