Mortgages on Flood Risk Properties

Flooded Home

Nationwide, the UK’s largest building society, has stopped lending mortgages on some properties identified as having a high risk of flooding.

Nationwide uses advanced flood risk mapping technology to determine the flood vulnerability of properties, and will not provide mortgages for homes it classifies as high risk, according to Rob Stevens, the head of property risk, who spoke to Bloomberg for an article which can be accessed here: UK’s Nationwide Won’t Lend to Some Homes Over Flood Risk.

Recent reports revealed that weather-related home insurance claims in the UK reached a new peak last year, with floods contributing to half of the annual £573 million total.

The pressing issue is that mortgage companies need to ensure the properties they lend on are insurable. Presently, residential insurance is both accessible and cost-effective, largely due to FloodRe, a government-backed reinsurance scheme – however this expires in 15 years, a term shorter than the average mortgage. FloodRe helps maintain affordable flood insurance by enabling insurers to transfer the flood risk portion of their policies to FloodRe. The scheme is financially supported by the Government through the Insurance Premium Tax.

Whilst this scheme works very well, it expires in 2039, at which point the market will need to switch to open-market insurance. This could mean high-risk properties may be unable to obtain insurance, therefore be un-mortgageable and their values significantly impacted.

In the next 15 years, FloodRe effectively has to transition the market so that it is no longer needed.

The desired goal is that flood risk can be suitably managed, however where it cannot be suitably reduced, properties are constructed in a resilient and recoverable way such that no insurance claim is necessary.

FloodRe currently runs the ‘Build Back Better’ scheme, which offers a £10,000 grant as part of flood claim, which must be used to make the property more resilient to future flooding. There is no limit to the amount of times it can be used. Our founder highlighted this initiative in the launch video and introduced it to Parliament in 2022. The Build Back Better launch video can be viewed here: Build Back Better.

Despite its benefits, there is criticism that the scheme doesn’t go far enough. Critics advocate for a proactive approach—essentially, to “build back before” a disaster occurs. This involves enhancing flood resilience through comprehensive flood risk management, property flood resilience measures, and modifications to building regulations. For instance, building regulations could be revised to ensure that electrical systems are installed above anticipated flood levels, similar to how accessibility standards are enforced for disabled access.

The government is also investing in trying to prepare ahead of events through their Capital Expenditure projects with Property Flood Resilience delivery. At FPS Environmental Ltd we are the Environment Agency’s primary partner for surveying and risk assessment.

However, it is not possible for the government to protect all areas, and it is also only in the Government remit to look at resistance, not internal recoverability measures.

Whilst regulatory changes are needed, and aspects such as Flood Performance Certificates necessary, it is now vital for homeowners and businesses to take action in making their homes more resilient to flooding. This can be through resistance and recoverability measures, however should only start following a thorough survey inline with the CIRIA C790 Code of Practice.

You should be able to evidence that the C790 Code of Practice has been followed, or insurers and mortgage advisors may not consider any risk reduction strategies that have been implemented as part of their pricing.

We are aware of properties which have had pricing reductions in their insurance and excess through investing in PFR measures.

To start your journey, or simply obtain high-level advice about your property purchase, be sure to contact us.  If you’re looking at buying a property, our Homebuyer Flood Risk Report will placed you in the most informed position ahead of your purchase.

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