Hundreds of thousands of households in England could become “climate mortgage prisoners” due to increased flooding, a new report has revealed.
Public First’s paper, Flooding the Market: The Climate Mortgage Trap, finds that the owners of 430,000 homes, equivalent to the size of Birmingham, could fit this category by 2050, as they become “trapped” in high-interest mortgages for flood-prone properties they cannot easily sell.
The research, commissioned by the UK Sustainable Investment and Finance Association (UKSIF), says property values in the highest-risk flood areas could drop by “over 20%”. It also uses data to predict that the low-lying constituency of Boston and Skegness could become the “climate mortgage prisoner capital of England”.
The authors warn that the effects of this scenario would not only decimate personal finances but could “destabilise the housing market” and lead to a localised “credit crunch”.
The housing market’s critical ‘fault line’
The findings, compiled through interviews with UKSIF members, stem from an analysis of how rising flood risk – from river and sea, as well as surface flooding – could affect the relationship between mortgage lending and insurance.
Mortgage lending relies on insurance to safeguard the long-term values of homes by ensuring physical damage can be repaired and signalling risk to the market. But the authors say climate change “threatens” the delicate balance between these financial markets, as more frequent severe weather, such as flooding, will require “higher payouts” from insurers for damage claims.
They say this will likely lead insurers to “increase their premiums” or “not renew coverage altogether” from borrowers, depending on the level of risk in a particular area.
How homeowners become ‘climate mortgage prisoners’
The report says homeowners who are denied affordable insurance may have to accept mortgages with standard variable rates (SVRs), currently hovering around 7%, when their fixed-term periods end. This could leave them paying “an additional £4,000” in interest per year on average – almost as much as a typical UK household spends on food and non-alcoholic drink per year.
Households may also face costs up to £45,000 to make their homes liveable after a storm due to their climate exposure, while being uninsured. These properties would be hard to sell as they cannot be mortgaged or remortgaged and are unappealing to outright cash buyers.
Stuck paying exorbitant interest payments and footing mounting repair bills, they risk becoming “climate mortgage prisoners”. Public First’s research finds 116,000 mortgaged homes in England could become “uninsurable or prohibitively expensive to insure” due to high river and sea flood risk by 2050, rising to 430,000 once properties with high surface flood risk are included. That is roughly the same number of homes that make up the UK’s second-largest city: Birmingham.
‘Unprecedented’ wider market risks
If rising numbers of homeowners are unable to secure fixed-term mortgages for flood risk properties, it would be an “unprecedented scenario,” the authors warn. Large numbers of mortgage prisoners in communities could “disrupt the flow of lending” and create a localised “credit crunch”, putting pressure on financial services, they add.
This may result in extended selling periods and depressed sale prices, increasing loss-given default and triggering “collateral write-downs” on lenders’ balance sheets, which could “destabilise the housing market.”
The authors say an immediate market-wide shock is “possible, but unlikely”, with a crisis instead gradually unfolding as fixed-rate mortgage deals expire and homeowners are offered SVRs. This is partly due to the impact of FloodRe, which provides affordable flood insurance cover to at-risk homes built before 2009 and artificially suppresses real price signals for at-risk households.
However, without clarity on the scheme’s future, which ends in 2039, banks may begin restricting lending in high-risk areas well before then, “potentially by the end of this parliament”.
In a future worst-case scenario, where losses become “widespread” and banks profitability and resilience are heavily impacted, the authors say market shocks could “cascade through the wider financial system, posing a risk to overall financial stability.”
Whole neighbourhoods ‘abandoned’
The report shows how the physical impacts of climate change will be “geographically concentrated”, with some areas in England facing flooding disruption that could leave entire neighbourhoods “impoverished and/or abandoned”.
Deputy Reform UK leader Richard Tice’s Boston and Skegness constituency has the highest number of potential mortgage prisoners, with 8,600 homes at high flood risk by 2050, according to Public First’s analysis of government flood data. This would make it the “climate mortgage prisoner capital of England”.
The remaining top ten, in order of the highest risk of mortgage prisoners, are Thurrock (7,700 mortgaged homes), Goole and Pocklington (6,900), South Basildon and East Thurrock (5,100), Bootle (4,200), Sefton Central (4,200), Louth and Horncastle (4,100), Southport (3,600), Hastings and Rye (3,300) and Rayleigh and Wickford (3,200).
Prices in the highest flood-risk areas could drop by over 20%, potentially pushing some borrowers into negative equity. Demand would shift towards low-risk areas, with house prices in these safer areas rising by as much as 8%, making home ownership more competitive and “unattainable for many young people and families looking to get on the housing ladder”.
Key recommendations
The picture that emerges across the country is one of increasing risks from climate change and a diminishing capacity to manage it. The authors say this is not inevitable, but the government must set out a clear plan of measures to ensure homes are better protected.
Their recommendations include mandating Flood Performance Certificates (FPCs) for homes, before expanding this to cover Resilience Performance Certificates (RPCs), and to build property-level flood resilience (PFR) measures in high-risk areas. Similar to Energy Performance Certificates (EPCs), FPCs and RPCs would show the risk to a property and how to reduce it.
The authors have also urged ministers to confirm FloodRe’s future by the end of the parliament, giving insurers and lenders certainty ahead of the 2039 closure while avoiding a “cliff-edge” where high-risk homes become uninsurable and un-mortgageable.
The report also suggests the government should be “boosting green mortgage uptake” and prepare the market for future “resilience mortgages”. As part of this, the FCA should consider encouraging clearer product names and suitability checks in broker advice so consumers can better understand and compare these mortgage products.
Policymakers should also consider new ways to strengthen planning policy and building regulations to support property-level flood resilience measures, the authors suggest. This could include introducing “resilience measures as standard” in newbuilds to balance the need to meet the government’s target of building 1.5 million homes, while also protecting households from rising flood risk.
More broadly, they say the government should strengthen and accelerate the UK’s climate adaptation strategy, ensuring this is integrated across relevant government policy objectives – such as bringing together natural flood management and farming policy.
READ THE FULL REPORT HERE: https://uksif.org/wp-content/uploads/2026/03/Flooding-the-Market-The-Climate-Mortgage-Trap.pdf
Stakeholder comments:
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 this Parliament, we estimate that by 2050, up to half a million households could be left trapped on in unsellable homes and potentially on higher rates, having a destabilising effect on the housing market. The clock is ticking on the nation’s largest asset class.”
James Alexander, CEO of the UK Sustainable Investment and Finance Association (UKSIF), said:
“This report shows climate change-driven flooding threatens both hundreds of thousands of 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 unmortgage-able. 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 Green Party Spokesperson for Housing, Communities and Local Government, said:
“The effects of climate breakdown are only becoming more apparent, with extreme weather incidents becoming more frequent and severe. My own constituents in North Herefordshire know this all too well, with repeated bouts of flooding leading to countless homes taking in water, lost crops, cancelled trains, and more.
“This report is clear the UK is simply not prepared for the scale of the challenge climate adaptation amounts to. The government must do much more to progress climate adaptation measures and protect communities like mine: making space for water, protecting our rivers, and ensuring all new housing is built to be truly flood-resilient.”
Dimple Patel, CEO of NatureMetrics, said:
“This report is a timely reminder that climate risk doesn’t stop at carbon. Flooding, biodiversity loss, and the degradation of our natural systems are deeply intertwined, and as this report makes clear, the consequences are already working their way into our financial markets. Hundreds of thousands of ‘climate mortgage prisoners’ will be the inevitable result of delayed action to strengthen our climate and nature defences.
“The mortgage market is a unique space where financial investment windows align with the longer-term timelines we see for natural ecosystem recovery. This means it could take the lifetime of a mortgage to see recovery efforts payoff; prevention is significantly more profitable than recovery. Rapid innovation in the climate and nature data space means we now have defensible, auditable, and enterprise-grade information to drive action to protect investments and livelihoods.”
Eoin Murray, Chief Investment Officer at Rebalance Earth, said:
“This report makes clear what we’ve long argued: risk from increasingly frequent extreme weather events is financial risk, and the two can no longer be treated separately. The prospect of 430,000 households becoming trapped by flood exposure should be a wake-up call — not just for insurers and lenders, but for anyone serious about the long-term stability of the UK housing market. Nature-based solutions like wetland restoration and natural flood management remain chronically underappreciated and underfunded, yet they are among the most cost-effective tools we have to reduce this risk at source.”
Notes to editors:
Public First’s analysis of constituency data is based on ONS household projections, OBR house price projections, Defra flood risk data, and the National assessment of flood and coastal erosion risk in England 2024. Figures for the number of mortgage prisoners are rounded to the nearest hundred.
ONS household projections by local authority were mapped onto parliamentary constituencies to provide forward estimates of household numbers. Census data on age and housing tenure status and ONS population projections by parliamentary constituency were then used to estimate the future number of mortgage holders in each constituency. It was assumed that age-adjusted rates of mortgage-holding remain at similar levels to the latest (2021) Census.
Outstanding mortgage debt by parliamentary constituency was estimated using data in the Wealth and Assets Survey on mortgage debt as a proportion of home value by age and region. This was combined with data on average house prices by constituency to produce more geographically granular estimates of outstanding mortgage debt by age group.
Defra flood risk data and the national assessment of flood and coastal erosion risk in England 2024, were used to understand the number of high flood risk homes in parliamentary constituencies. It was assumed that the proportion of high flood risk homes with mortgages mirrored our projections for the constituency as a whole.