The Council of Mortgage Lenders is calling on the new chief secretary to the Treasury Paul Boateng to increase spending on flood defences, in line with the Government's own recommendations.
It wants Boateng to approve spending of up to £140m on flood defences, as recommended in the Government's National Appraisal of Assets at Risk carried out last year for the Department of the Environment, Food and Rural Affairs.
The CML says it is making the request after figures from the Office of National Statistics last month showed that 11 per cent of all new dwellings built in England between 1997 and 2000 are in areas defined as a flood risk. It says lenders and insurers are becoming increasingly concerned about possible widespread flooding of homes.
It warns that unless the Government takes action, areas that are regularly flooded may be blighted because people cannot get insurance, causing properties to become unmortgageable. According to the CML, there may soon be some areas that insurers refuse to cover.
CML deputy director general Peter Williams says: “The ability to obtain insurance at a reasonable cost is a key requirement for lenders and borrowers. Without the protection of insurance, the lender's security in the property is threatened, making it virtually impossible to obtain a mortgage.
“Even if borrowers could get a loan for the property, they would be extremely vulnerable if they had to meet the costs of any significant flood damage from their own pockets.”