From 1 January 2027, updated banking rules known as Basel 3.1 will change property valuation requirements for loans secured against property, including commercial mortgages and some bridging and growth finance facilities.
Effectively, these rules seek to ensure that banks regularly monitor the value of properties taken as collateral and assess the relative risk of each property secured loan. As a consequence, some customers will need a new valuation and will be responsible for the fee under their loan agreement.
We know that being asked to pay for a new valuation isn’t going to have anyone jumping for joy. We’re doing what we can to mitigate the effects.
When will a new valuation be needed and how does this impact customers?
For loans secured against property, we will need a new valuation if:
- We estimate that its value has fallen by more than 10% since the last valuation
- Something happens that is likely to permanently reduce the value of the property
- It’s been more than five years since the property was last valued (for loans less than £2.6 million)
- It’s been more than three years since last valuation (for loans of or greater than £2.6 million)
For our customers, this means some of their property loans will be due a new valuation once January 2027 comes around. Under the terms of our loan agreement the borrower is required to pay for these valuations.
How can I pay?
You can pay the valuer directly in full or add the fee to your loan balance.
If you add the fee to your loan, you can repay that fee in full within 12 months without penalties.
How much will it cost?
Fees depend on the value of the property. The following are indicative charges from our valuation partner, VAS, and are not guaranteed.
We receive no commission or other incentives from VAS.
| Property value | Potential valuation fee |
|---|---|
| £0 – £250,000 | £450 + VAT |
| £250,001 – £500,000 | £550 + VAT |
| £500,001 – £1 million | £650 + VAT |
| £1m+ | Bespoke fee |
If you have questions about your property-secured loan, contact your relationship manager.
FAQs about Basel 3.1 for established businesses
What is Basel 3.1?
Basel 3.1 is the latest version of rules for the banking sector. Overall, they set checks and balances to make sure banks are lending sensibly and keep enough capital available in case of emergencies.
The rules are for banks, not their customers. Some of the rules have a knock-on impact on customers.
What does Basel 3.1 change for my business?
It will change almost nothing about your banking experience. The only likely impact you’ll see is if you have a loan that uses a property as security, like a commercial mortgage, as well as some bridging loans or growth finance facilities.
The main change is that your bank now has to re-value your property every three or five years (depending on a few factors). As the borrower, you’ll be responsible for paying the valuation fee, in accordance with your loan agreement.
Who sets the Basel Framework?
The Basel Framework is set by the Basel Committee on Banking Supervision (BCBS), then translated into national banking policy by industry regulators in each country. In the UK, that’s the Prudential Regulation Authority (PRA).
Why does my business have to pay for the revaluation on a property?
The terms of our loan agreement require that the borrower pays for valuations. This is the same for everyone with a property-secured loan. You can find the details in your loan terms and conditions.
What are my options for paying for a property revaluation?
You can either pay the valuer directly or, with Allica, you can add the fee to your loan balance (also called capitalising). We’re also giving customers a 12-month grace period if they choose to capitalise the fee, during which they can change their mind and pay the fee in full without any penalties.
