Climate risk is expected to become a bigger factor in home loan approvals, with one major bank telling customers it's a key consideration when considering applications.
There's thought to be tens of thousands of properties around the country at high risk from extreme weather and rising sea levels, with experts saying it's inevitable their values will decline – and many homeowners have a misconception around how safe they really are.
From flooding and inundation to landslides and earthquakes, New Zealand is one of the most natural-disaster-prone countries in the world. And with extreme weather events expected to become more frequent, Westpac's become the first bank to announce moves to add natural hazard risk information to home-lending conversations.
Major bank announces new mortgage restrictions for high-risk homes - Watch on TVNZ+
Wetspac said around 2% of properties they lend for would be considered at very high risk of natural hazards.
The bank's head of consumer lending and insurance Jo McGregor said a recent survey highlighted customers wanting more natural hazard information.
"We did a survey back in June and 90% of our customers said natural hazard information is really or very important to them but with the follow-up question, they said they weren't always sure where they could go to really understand it," she said.
"There are so many different data sources, but what this does give them is the bank's perspective on that property and how we're thinking about it from our perspective."
McGregor said the bank was not moving to risk-based pricing and didn't expect to be declining applications solely based on risk. However, in a small number of cases, it may mean the amount they were comfortable lending was less.
If, for example, the customer wanted to borrow $1 million on a property, McGregor said the bank may say they were more comfortable lending $800,000 "and then just have a conversation around that".
1News contacted ANZ and Kiwibank to see if they'd follow suit.
In a statement, an ANZ spokesperson told 1News their "existing requirements remain the same".
"Customers need appropriate insurance and we recommend they obtain a [Land Information Memorandum] and have it reviewed by their solicitor. Where issues are identified, customers should talk to their solicitor and to their bank before proceeding," the spokesperson said.
"As has always been the case, we may decide not to accept a property as security for a range of reasons, including insurability or natural hazard risk."
Meanwhile, a Kiwibank spokesperson acknowledged that climate-related risks remained "an important and evolving issue for New Zealand communities".
"We're continuing to monitor developments, participate in industry discussions and consider the implications for our customers."
It's estimated more than 14,000 properties – worth $12.9 billion – could experience at least one damaging flood by 2060.
Independent climate economist Dr Belinda Storey welcomed Westpac being public about their decisions.
"It's very likely that more and more banks are going to think twice about lending in these locations which is a positive thing for how we manage risk as a country," Storey said.
She added that people "have a misconception about their risk because they're relying on institutions to help them make that decision".
"If a property is consented, if you can get insurance on it today and a mortgage on it today, people perceive that property is going to be fine for the next decade, when actually if you get insurance today, that just means you can get insurance for the next 12 months.
SHARE ME