A new FCA paper on how flood risk relates to the mortgage market in England has shown that around 1 in 7 mortgage contracts – 15.5% – are linked to postcodes with some level of flood risk.
The data highlights how high-risk exposure to surface water flooding is concentrated in and around London, with Essex showing the highest proportion of postcode centroids in the high-risk category (6.5%).
Exposure to flooding from rivers and the sea is highest in Lincolnshire and East Yorkshire, where a large portion of postcodes fall within the medium and high-risk categories (8.5% and 7.7%, respectively).
Richard Pinch, senior director at banking and credit advisory consultancy Broadstone, commented: “The scale of flood risk across England’s mortgage market raises serious concerns for homeowners who could see their properties become harder to insure or sell, and lenders facing increasing financial risks across their mortgage portfolios.
“For homeowners, the consequences of flood risk can be severe, from soaring insurance premiums and falling property values to difficulties remortgaging or selling. In the worst cases, households could find themselves trapped in properties that are increasingly difficult to insure or finance.
“Flood risk also presents a significant challenge for mortgage lenders, threatening property valuations and potentially eroding the value of the security backing their loans. As extreme weather events become more severe, lenders could face greater credit losses and increased risks across their mortgage portfolios.
“The challenge will be managing these risks without restricting access to mortgage finance in flood-prone areas. More sophisticated climate risk modelling, stronger flood defences and closer collaboration between lenders and insurers will be critical to protecting both borrowers and the wider mortgage market.”
