In recent weeks, the EU has adopted a directive aimed at creating a single market for mortgage credits. A landmark decision for RICS, as for the first time Member States will be required to adopt reliable property valuation standards. These standards are to be developed taking into account recognised international valuation standards, including RICS’ Professional Standards for Valuation, also known as the ‘Red Book’.
The effects of the financial crisis are still being felt five years on. GDP is lagging in many countries, especially in Europe, where the financial crisis has evolved into the euro crisis. Credit availability is a crucial part of national economies and financial stability. The mortgage credit directive is an important step for consumer protection. Ensuring that mortgage credit markets operate in a responsible manner will thus lead to increased financial stability.
RICS was involved throughout the decision making process leading to this directive and engaged with the European Parliament, the European Council and other stakeholders such as the European Mortgage Federation to discuss the importance of property valuation in the mortgage lending process.
RICS believes that sound valuations for residential mortgage purposes are both in the interest of the mortgage sector as well as consumers, as determining the value of a property helps in establishing the size of a mortgage (LTV, or Loan-to-Value), as well as helping the consumer to assess whether what they aim to spend conforms with what the market would pay at that time.
The directive requires valuers to be professionally competent and sufficiently independent. It states that valuation standards in order to be considered reliable should take into account internationally recognised valuation standards, including those developed by the International Valuation Standards Council (IVSC) and RICS.
RICS is pleased that the role of valuation standards is acknowledged in this directive. The adoption of this text establishes conditions to ensure a high degree of professionalism amongst creditors and credit intermediaries, values at the core of RICS’ business philosophy.
Reno Cardiff MRICS, member of the RICS Europe Board and chair of the RICS Europe Virtual Valuation Network, considered that “the adoption of the Mortgage Credit Directive is a historic step for the valuation profession in the EU. Ensuring property valuation is done according to recognised standards by properly qualified valuers is a key component in inspiring trust and confidence to lenders and consumers alike. RICS is looking forward to work together with all interested parties to assist national governments in implementing the requirements of this Directive.”
RICS Europe Head of External Affairs & EU Liaison, Sander Scheurwater, explained that “together with qualification and regulation, international standards form the core of the RICS value proposal. Ensuring national standards are in line with the International Valuation Standards means countries will operate in a consistent, transparent and high quality manner globally. Through RICS Valuer Registration, we are the only global organisation that actively monitors its valuation members through self-regulation, thereby increasing confidence in the market that standards are not only prescribed by law, but also used in practice.”