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Borrower beware: lenders lowballing property valuations by as much as $120,000

Updated 19/03/2024
Borrower beware: lenders lowballing property valuations by as much as $120,000

Australian homeowners are being warned to shop around with a range of lenders when they are looking to take out a home loan or refinance after Financial comparison marketplace and advice company Compare Club, has seen a spike in discrepancies in property valuations between  lenders on the same properties. 

In some cases the difference was as much as $120,000 which can have massive financial implications for the borrower and even result in being knocked back entirely.  in higher interest rates, increased borrowing costs, and even disqualification for refinancing. 

Some lenders are reportedly ‘lowballing’ the value of properties during the loan approval process which can cost borrowers thousands of dollars over the term of their loan.

While all lenders have their own criteria for valuing a property how the property is valued has big financial implications for the borrow including higher interest rates, pushing the borrower over 80 percent on their loan to value ration (LVR) which then attracts the additional cost of being charged lenders mortgage insurance (LMI).

How much property under valuation by banks is costing Australian homeowners

Compare Club crunched the numbers and calculated the difference on the average property price per state and how much extra it would cost a homeowner if their mortgage was over 80 percent LVR and would require LMI. In NSW the average sale price if a property  is $1,122,430 if the borrower who is looking to refinance and has an LVR of 79% on an average interest rate of 6.19%  their repayments would be $5817.00 a month. 

If the LVR was 81% however (if the property was valued lower by the lender) the borrower would have to pay an additional Lenders Mortgage Insurance of $7879.00 - all due to the price the property is valued at.

For people wanting a loan to buy a new property who will have to pay stamp duty as well a low valuation can push a borrowers LVR even higher once those extra costs are incorporated.

Case study: $76k difference in Newcastle property valuation

Mark Davis from Newcastle experienced a staggering $74,000 difference in property valuation when seeking to refinance his mortgage. The first two lenders valued his property at $450,000 and $470,000 respectively, necessitating Lender's Mortgage Insurance (LMI) and significantly higher loan repayments. However, opting for the third lender's valuation of $524,000 allowed Davis to secure a loan at a lower interest rate, reducing his monthly repayments by $1,280. 

Compare Club’s Head of Research, Kate Browne, said a worrying pattern had emerged of properties being valued  by different lenders at such a wide variation that borrowers are at risk of paying far more in  interest rates and additional borrowing costs if they don’t shop around.

“Historically, lenders would typically accept the sale price of a property as its valuation, considering it reflective of its market value. However, the lending environment is changing, with financial institutions adopting stricter loan criteria we are seeing the difference in what each lender assesses the value of the property to be.This shift underscores the importance of enlisting the services of a reliable mortgage broker who can navigate the increasingly complex lending landscape, to assess the best possible value loan ” she said.

"Your lender's property valuation is crucial in determining your borrowing capacity, interest rate, and loan-to-value ratio (LVR). Our findings indicate a trend in which some lenders undervalue homes, adversely impacting borrowers' financial positions.”

“We're seeing it happen more often to our customers. Low bank valuations are becoming increasingly common. This affects your ability to secure a loan and has a tangible impact on your financial well-being, from higher interest rates to additional borrowing costs."

In the past, most lenders accepted the sale price of a home as its default valuation as this was an amount at least one buyer was willing to pay. These days, the lending landscape looks a little different. The lending landscape is evolving, with banks tightening their loan criteria. This makes the role of a reliable mortgage broker even more crucial as they can look at a wide range of lenders who all may value the property in question differently

“It’s not just any mortgage broker; it’s about finding a good one. If the brokers don’t have a decent-sized range of options to work with, it will work against you. We have an extensive network of 50 lenders, providing borrowers with a unique advantage, ensuring they are well-placed in the competitive market”

“If you don’t get it right, you will pay higher interest rates. Paying a higher interest rate on a mortgage can lead to increased monthly payments, longer loan repayment periods, reduced affordability for additional expenses, and slower growth of home equity, potentially causing financial strain and limiting future borrowing opportunities.”

“Working with expert mortgage brokers who know the landscape well and understand the  nuances of lender practices is crucial. It’s very difficult to navigate the complexities of property valuations and the many different lender options available to you.,” said Ms Browne.

Case study: $120k refinancing difference was “very frustrating”

WA teacher Marina approached numerous banks about refinancing her mortgage for home improvements. She was shocked by the variation in her home valuations, some so low that it meant she wasn’t eligible for refinancing. 

Her bank ANZ, and the Commonwealth Bank came in at $600,000 while Westpac’s valuation was $610,000.

“I was not happy at all, it was very frustrating. These banks would take me to cloud 9 saying they’d help and it wasn’t a problem. They’d give me all these numbers and bank jargon and then they came back with a low valuation meaning I couldn’t refinance.”

After three months of trying to work it out on her own, Marina was able to get a valuation of $720,000 from BankWest with Compare Club’s help.

“I was surprised at how fast Compare Club was able to sort it out. They were able to get me a higher valuation, a difference of $120,000 and it was really easy.” 

“Our message is, if you’ve been told you don’t qualify for a loan or that you will need to take out LMI it may just be the case you have been talking to the wrong lender. Using a mortgage broker can open up far more options and opportunities for you, as well as getting you the best possible deal on the market. There are a huge range of lenders out there beyond the big four who are all worth exploring.”

For more information on navigating the changing dynamics of property valuations and securing the best home loan deals, please visit Compare Club's Website.

Notes: Lender valuation vs Market valuation:

A lender valuation is usually more conservative than your market estimates because, in the event there is a default on your loan, the bank wants a quick sale that can make back enough to cover the loan.. 

A market valuation is an estimate based on reported real estate agent valuations, old sales data and comparable recent sales prices.


For media enquiries and case studies, please contact:

Jasmine Kostas

Media + Capital Partners


About Compare Club

Compare Club is one of Australia’s fastest-growing personal finance marketplaces, it helps Australians save money by navigating complicated and important financial decisions. Compare Club’s panel of experts offers bespoke advice to over 3.6 Million members making 1 Million product enquiries per year on key financial decisions, including health insurance, electricity & gas bills, and personal, car, and home loans. Compare Club is locally owned and employs 350 passionate staff across Sydney, Melbourne, Brisbane, and another 50 staff in Indonesia and the Philippines.