Nationwide stops loans for flood-prone homes

Nationwide Building Society, one of the UK’s top mortgage lenders, has stopped offering mortgages for certain homes deemed at high risk of flooding.

Bloomberg recently reported that the lender made the decision due to concerns that such properties could become uninsurable and potentially unsellable in the future.

This highlights the growing challenges in the housing market linked to climate change and insurance risks.

“The company will decline to make a loan to purchase some properties it deems to be at high risk,” Rob Stevens, head of property risk at Nationwide, was quoted as saying in the Bloomberg report.

“If we’re doing a 40-year mortgage term, and there’s something there that I know could fundamentally change for the customer, I can’t not know that.”

According to Stevens, Nationwide utilises advanced mapping technology to assess the flood vulnerability of individual homes. Properties identified as high risk will not be considered for loan approval.

However, in another report, Stevens told The Guardian that Nationwide still provides loans for properties identified as flood risks, emphasising that the company has not withdrawn any mortgage offers. He noted that all flood-related assessments are conducted prior to making an offer, ensuring that potential borrowers are informed about the risks from the outset.

He said the lender is able to approve loans for the majority of homes, even those identified with potential issues, provided there are mitigating measures in place, such as flood defences.

Nationwide stops lending on some flood-risk properties https://t.co/OwWqQJgyqd

— The Guardian (@guardian) April 30, 2024

Nationwide claimed that the move has only affected “a very limited number” of homes, though figures were not provided.

Weather-related home insurance claims in the UK hit a record high last year, with floods accounting for half of the annual total of £573 million in claims.

Currently, residential insurance remains both available and affordable, largely thanks to FloodRe, a government-supported reinsurance program. However, the scheme is set to expire in 2039, which is sooner than the duration of the average mortgage.