Lenders and insurers are becoming increasingly concerned about possible widespread flood-ing of people’s homes.
The Office of National Statistics has published figures which show that 11% of new dwell-ings in England between 1997 and 2000 were built in areas designated as flood risk by the Environment Agency.
Following this announcement, the Council of Mortgage Lenders (CML) has called on the new chief secretary to the Treasury, Paul Boateng, to increase spending on flood defence in line with the Government’s recommendations.
The National Appraisal of Assets at Risk, carried out by the Department of the Environment, Food and Rural Affairs, recommended spending £120m-£140m to maintain present standards.
After the severe floods of 2000, insurance companies agreed to maintain flood cover for their existing households and small businesses, but this agreement runs out at the end of the year.
The CML believes that unless there is positive action by the Government, regularly flooded areas may become blighted because people cannot get insurance ‘ resulting in a property that cannot be mortgaged.
Peter Williams, deputy dir-ector general of the CML, said: ‘The ability to obtain insurance at a reasonable cost is a key requirement for both lenders and borrowers. Without the protection of insurance the lender’s security in property is threatened, making it virtually impossible to obtain a mortgage. Even if borrowers could get a loan for the property they would be extremely vulnerable if they had to meet the costs of any significant flood damage from their own pockets.’
The insurance industry is waiting for the Government’s spending review, due in July.
Franchesca Breeze, PR manager at Royal SunAlliance (RSA), said: ‘We, along with the Association of British Insurers and other insurers, are also asking the Government to spend money on this, as frankly I think the industry is beginning to have to prop up the Government.
‘RSA lobbied the Government earlier this year and is now waiting a response. Once we know the amount of money the Government is prepared to pump into this, then we will decide on what we do and don’t cover. However, until now we have been quite sympathetic.’