Landlord buy to let insurance prices are set to rise as a new flood insurance deal struck between insurers and the government is likely to exclude rented out homes.
The insurance agreement – Flood Re – is aimed at making sure homeowners in flood risk zones can still pick up affordable cover.
To make the agreement work financially, the government has agreed insurers can levy £10 from every house insurance policy to build a fund to subsidise flood claims from homeowners.
The wide-ranging term is likely to include both private and local authority rental homes.
As a result, housing organisations and the Council of Mortgage Lenders (CML), the trade body for banks and building societies mortgaging homes, are warning landlord buy to let insurance prices are likely to see a big rise.
If buy to let landlords cannot take out buildings cover including protection against floods, it’s likely to invalidate the terms of their mortgages.
This could lead to the lender calling in the debt and might make the house unsellable as a letting property if a new landlord cannot arrange insurance.
Official figures estimate 8 million homes belong to private or public landlords and about 50,000 are in flood risk neighbourhoods, says the Residential Landlords Association.
CML director-general Paul Smee said: “We find it difficult to believe that the original policy intention was to exclude a whole swathe of residential property from the stated aim of ensuring that affordable flood insurance continued to be available across the market.”
The Association of British Insurers claims insurers have no evidence to suggest buy to let landlords would have problems finding affordable property insurance despite the Flood Re agreement. However, they did not comment on whether prices were likely to increase.
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