Insurance is the fault line for Britain’s largest asset class: our homes. ‘Flooding the Market: The Climate Mortgage Trap’ explores what could happen to households and the housing market if properties become uninsurable due to rising climate risks.

Despite record investment announcements, flood risk in England is rising due to historic underinvestment and worsening storms. The Environment Agency estimates up to eight million (one in four) homes could be at risk of flooding by 2050. This could make homeownership riskier and more costly, as flood-prone properties could become harder to insure – a requirement for mortgages.

For now, this market signal is blunted by Flood Re, which subsidises high-risk homes built before 2009. But this protection is temporary: the scheme ends in 2039, and the underlying risk is growing.

With UKSIF, Public First conducted stakeholder research across financial services to assess how climate risk could impact households. The report also includes new economic analysis identifying the English constituencies with the highest concentration of mortgaged homes at greatest flood risk. Without decisive action to reduce flood risk and clarify the future of FloodRe, the following impacts could occur:

• Nearly half a million (430,000) households could be unable to sell, remortgage, or relocate due to their flood exposure — enough to fill the city of Birmingham. Public First analysis finds that of the eight million homes at risk of flooding by 2050, around 430,000 mortgaged properties face the highest risk. These homes could become uninsurable or be prohibitively expensive to insure, consequently making them hard to mortgage and sell, which risks creating climate “mortgage prisoners”. By 2050, Boston and Skegness constituency could have the highest concentration of at-risk mortgaged homes (8,650).
• If flood-risk homes become difficult to mortgage, the total value of a property in the most vulnerable areas could drop. There are parallels in the housing market, where mortgages have become harder to obtain. For example, for short leaseholds, prices have fallen by around 20%. A price impact due to flood-risk of this magnitude is therefore not implausible. In safer areas, Public First modelling suggests that house prices could rise by as much as 8%.
• Mortgage holders in the highest-risk properties may be unable to switch lenders or secure lower rates, leaving them with higher repayments. Lenders require home buyers to have insurance when they first take out mortgages to safeguard the long-term value of the home from physical damage. In a world without FloodRe, more frequent flood events may cause insurers to raise premiums or not renew coverage altogether. Homeowners who are incapable of switching to a new mortgage provider or finding a lower interest rate could effectively become ‘trapped’, paying additional interest payments at the standard variable rate (SVR). The SVR of interest averages at around 7%, compared to the average competitive rate of 4% at the time of writing.
• Homeowners in at-risk properties are more likely to face rebuild costs to make their homes liveable. Uninsurable properties are, by definition, riskier. That means, on top of potentially paying higher mortgage repayments, homeowners are more likely to pay to make their homes liveable after a storm. This can cost as much as £45,000.
• More climate mortgage prisoners could increase the likelihood of defaults, a localised “credit crunch”, and pressure on financial services. Climate risk is geographic – if many properties in an area become hard to insure, mortgage and sell, it could cause a drag on lending flows and create local credit crunches. Longer selling periods, depressed selling prices, and increased likelihood of defaults could make lending less profitable for banks, making them more vulnerable to other financial shocks, such as geopolitical crises.

 

Taken together, the picture that emerges is one of increasing risk and diminishing capacity to manage it, although this is not inevitable. The government, in step with insurers and mortgage providers, could minimise these risks by:

• Helping households to better understand the risks to their property through clear flood and resilience performance certificates, and insurer guidance on FloodRe eligibility.
• Setting a 2029 deadline on FloodRe’s future. Mortgage lenders and homeowners need clarity on the future of insurance coverage to maintain confidence in lending against at-risk properties.
• Use the Warm Homes Finance Taskforce to grow the green mortgage market. Working with the FCA, lenders, and brokers should make it easier to price green mortgages to fund energy efficiency upgrades and eventually improve climate resilience.
• Strengthen planning and building regulations in developments. New developments in flood-risk areas should include proper protection and mitigation measures, such as sustainable urban drainage systems and property-level flood resilience measures.
• Embed adaptation across government policymaking. Climate resilience should be treated as a key objective of infrastructure and land-use policy, rather than an isolated environmental concern.

 

Read the full report here

Full economic constituency-level analysis here

 

Quotes from key stakeholders

Amy Norman, Director at Public First, said: “For most British families, their home is their single biggest source of wealth. But weather risks – like the flooding we saw this winter – are starting to erode that, as some properties become harder to insure and mortgage. Without action from this Parliament, we estimate that by 2050, up to half a million households could be left trapped on higher rates in unsellable homes and have a destabilising effect on the housing market. The clock is ticking.”

James Alexander, CEO of the UK Sustainable Investment and Finance Association (UKSIF), which commissioned the report, said: “This report shows climate change-driven flooding threatens both hundreds of thousands of UK homes and the system we rely on to buy and sell properties. It also has the potential to trigger a destructive shock to the housing market that could ripple across the wider economy.

“Policymakers should consider a range of steps that empower homeowners to address the mounting climate risks facing their properties. This could include encouraging mortgage products that help finance property resilience improvements, alongside initiatives such as mandated Flood Performance Certificates that offer vital insights into these threats.

“Ultimately, this report should serve as a warning about the urgent need to prioritise climate adaptation and resilience strategies that protect both households and the financial sector.”

Jason Storah, CEO UK & Ireland General Insurance, Aviva, said: “As a leading insurer, we see firsthand the devastation and disruption that floods can bring. Flood risk is increasing and our own recent study found that one in nine new homes built between 2022-2024 are in areas of medium or high-risk river, coastal or surface water flooding. The findings in this report are a further reminder that action needs to be taken.

“Insurers are sending a clear signal to Government that planning and building regulations need to be strengthened to ensure we aren’t putting more homes and communities at risk in future.”

Polly Billington, Labour MP for East Thanet and Co-Chair of the All-Party Parliamentary Group for Coastal Communities, said: “This report highlights the growing threat of climate change to communities across the country, especially coastal communities like mine that are on the front line.

“Families could find their homes uninsurable, businesses could find the same with their premises, and communities could end up with annual high costs of repairs. Longer periods of extreme weather, including heavy rain and flooding, now pose critical risks to the sustainability of our financial industries.

“These findings should serve as a wake-up call: there is no time to waste in properly assessing and managing such risks.”

George Freeman, Conservative MP for Mid Norfolk and Sponsor of the Flooding Bill, said: “Flooding is no longer a rare event – it is becoming an annual trauma for thousands of homes across the UK, with serious consequences for homeowners’ ability to insure, mortgage and sell their homes. Despite repeated warnings from colleagues across Parliament, the current Planning and Infrastructure Bill is failing to address inland flooding.

“If homes become uninsurable, they become unmortgageable. That is a ticking time bomb for families, lenders and the housing market. With massive commuter housing estates being built on the outskirts of towns and villages across the countryside, too many places like Attleborough in Mid Norfolk now see regular flooding because development has raced ahead of drainage infrastructure.

“My Flooding Bill contains a menu of practical measures developed by and with inland flood experts in affected communities. I am delighted this Bill already has cross-party backing and hope we can embolden the Government to make the big changes that are needed to avoid this growing problem becoming a crisis of home insurability no one can afford.”

Sarah Dyke, MP for Glastonbury and Somerton and Liberal Democrat Spokesperson for Rural Affairs, said: “Given the devastating flooding we saw earlier this year across Somerset, I’m acutely aware that communities like mine in Glastonbury and Somerton are increasingly under threat from climate change-driven extreme weather events.

“This report reinforces the urgent need for resilience measures to be incorporated into all new home building, with the Environment Agency projecting a 90% rise in properties at risk from river and coastal flooding.

“Specifically, it’s call to strengthen flood resilience standards in new housing must now be met by implementing Schedule three of the Flood and Water Management Act 2010. This measure, which the Liberal Democrats have consistently championed, would help ensure sustainable drainage systems are properly installed and maintained.”

Dr Ellie Chowns, MP for North Herefordshire and Spokesperson for Housing, Communities, and Local Government, said: “In my constituency of North Herefordshire, we have seen flooding again and again in recent years – roads inundated, trains cancelled, and homes taking in water.

“As climate change brings more frequent and severe extremes of weather, it is clear that the UK is simply not prepared for the scale of the challenge ahead.

“This report highlights the urgent need to take climate adaptation more seriously: making space for water, protecting our rivers and ensuring new developments are truly flood-resilient, rather than leaving communities to face the devastating consequences.”