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Mortgages may prove hard to obtain in flood-risk areas

  • 26/02/2002
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Increased flooding may prompt lenders to think twice before granting loans

Halifax has issued a response to the Government’s consultation paper on flood defence, in which it urges a full-scale review of flood planning and prevention.

But despite Halifax support-ing the consultation process, some experts fear it may become more difficult to obtain mortgages in flood-prone areas.

Ray Barrowdale, spokes-person at the Royal Institute of Chartered Surveyors (RICS), said: ‘It could prove difficult to obtain insurance and mortgages. It will create more problems for homeowners and potentially problems with house values. A lender would think twice about lending as there is a risk of not getting their money back.’

Ray Boulger, senior technical manager at Charcol, agreed but said a lender’s decision would be based on the valuer’s report.

‘The key factor which lenders rely on is the valuer’s report. If a lender asks a valuer to comment on flood risk and the valuer says it is high, a lender may decline the mortgage. The re-sale value of the house in three to six months’ could affect a lender’s decision on whether to offer a mortgage,’ he said.

Barrowdale condemned the proposed Government plans, as he believes not all houses in a flood-prone area should be subject to the same restrictions.

He said: ‘In areas subject to flood risk, the Government is planning to implement a local tax and the money raised would go towards better flood defences. We are not in favour of this as it would blight certain areas and tar all properties in the area with the same brush.’

Mark Hemmingway, head of media relations at Halifax, believes the Government’s proposals are positive and should not affect house prices or mortgage lending.

He said: ‘Flooding will not affect house prices. Areas such as Yorkshire which flood each year still see house prices continue to rise. It is a sought-after area and supply and demand maintains house prices. Some smaller insurance companies have indicated they may shy away from properties in flood-risk areas, but if you can get insurance, you can get a mortgage.’

According to Halifax, two million people and almost 200,000 businesses are located in flood-risk areas in England and Wales.

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