It was hard to miss the news of the floods that washed out Britain at the start of this year, especially in regards to the disaster on the Somerset Levels. Experts now feel that, as predicted, insurance costs are going to rise.
Put simply, people just want to live in some areas, such as on the banks of the river Severn, because of the location, despite the threat of flooding. This may become difficult however, as mortgage lenders may be wary of lending to people who can’t get home insurance, and could reject mortgage applications on the grounds that it is a risky property.
Insurance companies will want to charge much higher premiums so that in the event the houses do flood, they will be reimbursed financially to fix the damages, and be less out of pocket. They may even use high prices to dissuade people from taking out policies on risky properties.
What this means is that people who can’t afford home insurance are likely to be rejected by mortgage lenders when applying for a home in a high risk area, overall possibly stunting the housing market somewhat.
Fitch Rating have estimated that the cost of the December and January floods to insurers is in the region of £1.2 billion.
Surprisingly, however, the mortgage market appears not to have been hit by the flooding. Mortgage prices are following the trends they were before the floods, and many lenders are willing to alter their deals to help flooded homeowners cope, such as switching them to an interest only mortgage, for the time being.