Basel 3.1 What you need to know | Commercial Mortgages

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Basel 3.1: What you need to know

The Basel Committee on Banking Supervision has introduced changes to strengthen regulation, supervision and risk management for all lenders. It’s not new, Basel 3 is already in play, with Basel 3.1 set to land in the UK on 1st January 2027.

The PRA has confirmed tighter valuation rules. But we’ll do our best to keep it simple and work with you to make it as smooth as possible for your clients.

What’s changing?

All lenders must ensure property valuations are independent, accurate and up to date. Internal indexation alone is no longer allowed. For us, that means we’ve changed when we’ll carry out independent revaluations.

In a nutshell:

At origination: valuations continue as normal.

Ongoing checks:

Loans over £2.6m – revalue every 3 years.

Loans under £2.6m – revalue every 5 years.

Product transfers and major market changes trigger a revaluation.

FAQs in brief:

Cost: Paid by the customer. We’ll confirm the amount upfront. It can be paid directly to the valuer or added to the mortgage balance.

Type: Physical or desktop, we’ll confirm upfront.

Valuer: From our approved panel. We can share details and, at our discretion, allow the customer to choose. The final decision rests with us.

Lower value? A lower valuation might affect covenant, but it doesn’t automatically change loan terms. We’ll make sure your clients know if they need to do anything.

How often?

Loans over £2.6m: Minimum every 3 years.

Loans under £2.6m: Minimum every 5 years.

We may also revalue if a new product is taken, or market conditions change.

What happens at renewal? A product transfer will trigger a revaluation under Basel 3.1. If renewal coincides with a revaluation, we’ll try to align both.

What if the mortgage is repaid or the term ends? If a new product is not being taken, we’ll allow time to repay without revaluation. If a new product is taken, a revaluation will be needed.