That is before we introduce climate change into the equation, with the resulting extreme weather creating a pressure-cooker of uncertainty for mortgage lenders in the UK.
Whilst environmental factors such as subsidence, droughts, increased flooding, and soil erosion have long been a part of risk assessments, in these changing times, it is important that available datasets are harnessed to remove any added layers of uncertainty.
Currently, more than five million homes and businesses in England are at risk of flooding for example, meaning that accurate geospatial data around where any given property is located is essential. This is amplified by the fact that the UK has an aging housing stock, meaning that knowing where buildings are, and whether they can handle a changing environment, is also imperative.
Wide variances within postcode areas
There are 44 million addresses in the UK, but not all databases can help to pinpoint each one. While postal addresses are perhaps the most recognisable form of addressing data for example, they were designed exclusively for the efficient delivery of mail, so, when your purpose deviates from this – which it does for lending assessments – the insights drawn from this data quickly becomes unfit for purpose.
To put this into context, the largest postcode in the UK covers a huge area of 442km2, which contains a range of properties, all facing different types of environmental risk.
Getting the right addressing data can offer unparalleled context around risk at the level of individual properties. This allows essential decisions to be made for specific buildings in contrast to broader clusters of properties and assets, and also makes accurate addressing data an important tool for fraud analysis.
It’s also not all about quantity, the currency of the data, how recently it was captured, as well as how frequently it is captured is also an accurate assessment of risk. Only with this data to hand, can lenders look to mitigate against rapid environmental changes, such as flooding and subsidence.
For example, we have worked with Aviva and Partners to use AddressBase addressing data to assess risk and manage accumulation. The insurance company’s dedicated Geographical Information Systems (GIS) team used the addressing data with their desktop GI systems (ESRI ArcGIS), and integrated it with other datasets, to process flood and other peril models. This helped them to recognise trends that would otherwise be unapparent.
The accurate addressing data led to the creation of rating factors and pricing models that reflected reality.
Locating and visualising individual addresses and objects, from ponds to electricity substations, will allow lenders to assess each customer’s individual circumstances accurately and efficiently. In other words, it would help to ensure that they can offer the right price for the right risk, based on an exact location.
By looking beyond the postcode, mortgage lenders can unlock certainty in a time of constant change.