The Intermediary – October 2026 - Flipbook - Page 79
T E C H N O L O GY
Opinion
Can AVMs
keep up with a
turning market?
U
nited Trust Bank (UTB)
has expanded its use of
automated valuation
models (AVMs) to
larger bridging loans
up to £1m with a
maximum loan-to-value (LTV) ratio
of 75%. In the first weeks of 2026, 52%
of UTB’s bridging loan applications
qualified for AVMs. As the market
stalls, UTB has turned to AVMs to
speed up the time it takes to go from a
loan application to an offer on a home.
Brokers should welcome the speed,
but when is an AVM not enough?
An AVM’s speed is its key advantage.
It can give brokers and borrowers
faster offers, fewer delays and more
certainty. Clients who need to move
quickly gain more certainty about
when their funding will be in place.
UTB is expanding its use of AVMs.
About one-third of UTB’s bridging
cases in 2025 used AVMs on loans of
up to £1m at 75% LTV. This figure is
expected to be around two-thirds in
2026. Meanwhile, Allica raised its
residential bridging AVM limit from
£750,000 to £2m and its maximum
LTV from 70% to 75%.
While AVMs offer speed, there are
areas where they struggle. Because
AVMs lean on past sales, it takes time
for them to adjust when the market
changes direction. This maers
because the market is stalling right
now, with Rightmove reporting that
asking prices slipped 0.8% lower than
a year earlier despite a monthly rise
of 0.7% and homes for sale at a 12-year
high. At the same time, the Lloyds
House Price Index is currently flat,
and the Nationwide House Price Index
shows annual growth halving to 0.8%.
AVMs are designed to reflect past
sales in the area and not homes that
are outliers. If a home is unusual,
heavily renovated, or has few close
comparables, the price estimate might
be inaccurate. Houses in multiple
occupation (HMOs) have a similar
issue because the licensing, layout,
condition, and number of rentable
rooms heavily sway the valuation.
Flats likely deserve extra aention
in today’s market, with Nationwide
finding that flats were the weakestperforming property type in the
third quarter.
Balancing risk
In the US, regulators and lenders
have already realised the strengths
and limitations of AVMs. On 1st
October 2025, six US regulators
began requiring lenders that use
AVMs to run quality controls on
confidence, conflicts of interest, data
manipulation, sample testing, and
fair lending. Earlier, the US Federal
Housing Finance Agency (FHFA)
Office of Inspector General found that
AVMs “may be less reliable in areas
where properties do not share similar
characteristics.” Meanwhile, Fannie
Mae’s value acceptance programme
explicitly excludes AVMs from being
used for homes with two to four units,
renovation loans, or homes worth
$1m or more.
These US rules apply to main-home
mortgages, so they aren’t a likefor-like comparison with bridging
loans. However, they illustrate the
importance of having safeguards in
place as lenders increasingly turn to
AVMs. In the UK, some safeguards
already exist, such as LTV caps,
restrictions on property types, and
confidence minimums.
In my experience, one of the most
important things brokers can know
is when an AVM doesn’t tell the
full story and a desktop or physical
valuation is needed. For example,
brokers should not rely solely on
ELENA NOVAK
is lead real estate analyst and
researcher at PropertyChecker
AVMs for properties that recently had
major renovations. I also recommend
taking a closer look when you’re
dealing with prices that are well above
comparables, mixed-use properties,
HMOs, rural or unusual locations, and
falling local markets are all situations.
When in doubt, a desktop valuation
can quickly provide a more accurate
valuation without the extra work of a
physical valuation. For example, UTB’s
new desktop product for standard
residential property is a middleground option that provides more
accuracy while keeping the valuation’s
time and cost commitment lower.
As a broker, it’s essential to ask
questions before using any AVM tool
to know what confidence threshold
the AVM uses. In the case of UTB, this
information isn’t published. Brokers
should also find out what happens if
the AVM cannot value the property
and whether a desktop valuation is
available before a full inspection.
Brokers also need to prepare
their clients for the possibility of a
down-valuation. By checking recent
comparables, brokers can warn clients
early that the valuation may be lower
than the agreed price. This gives
clients more time to plan a response,
such as renegotiating the purchase
price or finding an alternative funding
option for the gap between the
valuation and the agreed price.
An AVM’s speed offers a real
advantage to brokers and clients, but
there need to be safeguards in place.
As lenders increasingly turn to AVMs,
brokers need to understand when an
AVM is enough and when the property
or market environment requires a
closer look. When the market turns,
good judgement protects clients from
over-relying on AVMs. ●
October 2026 | The Intermediary
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