New flood risk could devalue UK properties by more than 20 billion

UK homes may be overvalued by more than £20 billion due to flood risk, with potential asset losses looming. The end of the Flood Re scheme in 2039 is a growing concern, as it could make affordable flood insurance inaccessible for high-risk households. A BBC News report suggests that, depending on post-scheme insurability levels, total losses could surge to around £60 billion by 2050.

The End of the Flood Re Scheme

When the Flood Re Scheme concludes in 2039, the agreement between the Government and insurers will end, impacting affordable flood insurance options. Many homeowners and lenders have not factored this risk into the average 25-year mortgage term, leaving thousands of mortgages vulnerable. Experts are urging insurers, lenders, and the government to take proactive steps to mitigate the financial risks associated with this change.

Regional Concerns

A survey from assets.publishing.service.gov.uk has identified Grimsby, Skegness, and Salford as among the most affected towns facing increased flood risk. In some areas of Grimsby, homeowners could experience an annual average property value loss of nearly 5%. Without adequate flood mitigation and insurance measures, this could cause financial distress for many property owners.

The Impact on Lenders and Homeowners

The growing flood risk has significant implications for lenders. Providing them with accurate risk data can enable faster decision-making, better debt provisioning, and precise asset pricing. This would benefit not only financial institutions but also homeowners, offering greater security and peace of mind.

Property-level insights can help lenders assess risk profiles, Loan-to-Value (LTV) ratios, affordability criteria, and other property-related risks. However, with flood risks escalating, the government must act quickly to invest in flood defences and property-specific protections.

The Need for Urgent Action

With just 16 years until the Flood Re Scheme ends—well within the lifespan of a standard mortgage—there is a clear need for urgent action. The government must invest in flood defences, while insurers and lenders should incorporate flood risk impacts into asset pricing. Homeowners also need to be fully informed about future policy changes, ensuring they are prepared for the potential financial consequences.

Preparing for the Future

As flood risks continue to rise, the expiration of the Flood Re Scheme in 2039 marks a crucial moment for homeowners, insurers, and financial institutions alike. The potential devaluation of properties by over £20 billion, coupled with the risk of escalating losses, highlights the need for urgent action. With 16 years left before the scheme concludes, proactive steps are essential to protect the housing market and ensure that flood-prone areas are adequately safeguarded. Investment in flood defences and comprehensive flood insurance options will be key in minimizing financial disruptions for homeowners and lenders.