Home loans at risk as lenders insist on flood insurance

Homeowners could be refused mortgages if unable to secure flood cover in home insurance policies.

Halifax spokesman Chris Sonne said he believed it would be "difficult" to offer mortgages on properties not protected by flood insurance. "I suspect there will be specialist insurers who will come into the market to insure for floods," he said.

Sonne said Halifax customers who had previously been insured by Halifax would continue to be offered cover even if they were in a flood risk area. He said this would alleviate the problem of homeowners defaulting on their mortgages, which he said could become an issue.

A spokesman for online insurer esure said another danger to homeowners was that renewals could be difficult.

"The real issue is for people who have been flooded recently and who have let their policy lapse," he said. "There is a big danger if the insurer refuses to renew the policy."

Since 1 January this year, insurers were no longer obliged under the moratorium to provide flood cover. In accordance with the ABI's statement of principles following the removal of the moratorium, a spokeswoman for the Environment Agency (EA) said it was continuing to send sample data to the ABI until the end of January. She said this was a list of postcode sectors and a percentage proportion of houses in high, medium and low risk areas for insurers to use to calculate risks.

She said the EA had already given the ABI data for the southern region.

Associate director with engineering firm Arup Mark Fletcher said the EA was doing a good job. He said Arup was currently working with the EA and designing the Edinburgh flood scheme. "We have got to get away from it being the EA's problem," he said. "Current planning policies are far stricter. The government does have national frameworks in place but it takes time to design them."