Home insurance Updated:
Around a quarter of UK homeowners living in areas vulnerable to flooding could be rendered uninsurable when an agreement between the government and insurance providers expires next summer.
The 'Statements of Principles' agreement currently stipulates that insurance companies are obliged to offer flood cover within standard policies, although it does not necessarily guarantee that properties will be covered.
The agreement is due to expire in June 2013, after which insurers could refuse cover to homes exposed to flooding risks, leaving homeowners in breach of their mortgage contract. The issue could also result in mortgage lenders being exposed to an estimated £214 billion worth of 'blighted' properties.
According to the Department for Environment, Food and Rural Affairs, the average cost of damages as a result of flooding is between £20,000 and 30,000.
Mark Blackwell, managing director of xit2, who compiled the research, said: "No insurance equals no mortgage. This means the only people who'll be able to buy property at risk of flooding will be cash buyers – the lack of competition means prices will plummet."
"It is vital lenders are able to identify properties at risk before they value it and grant a mortgage. Failure to do so exposes them to potentially terminally blighted property and will increase the risk in their mortgage book."
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