NZ government rethinks flood bailouts: What mortgage advisers need to know

Climate policy shift may reshape mortgage lending risk

NZ government rethinks flood bailouts: What mortgage advisers need to know

The New Zealand government is considering a major shift in how it supports homeowners affected by floods and landslides – a move that could have significant implications for mortgage brokers and their clients. 

“We need to find a way to manage these events going forward and who takes responsibility and is there a shared responsibility,” Prime Minister Christopher Luxon recently told Radio New Zealand. “The government won’t be able to keep bailing out people in this way.”  

Traditionally, the government has spent billions buying out properties after severe weather events, but with climate change driving more frequent and intense disasters, that approach is under review, Reuters reported

What’s changing – and why it matters for brokers 

The New Zealand government is developing a national adaptation framework that could gradually phase out automatic bailouts for homeowners affected by floods and landslides.  

Rather than continuing to buy out properties after every disaster, officials are considering a 20-year transition period, giving the market time to adjust as expectations of government support are scaled back.  

At the same time, property records are now more likely to flag flood and landslide risks, a shift that could have a direct impact on property values and lending decisions. 

For mortgage advisers, these changes signal a new era of risk awareness.  

Lenders are likely to become more cautious about properties in high-risk areas, which could mean tighter lending criteria or requirements for additional insurance.  

Homeowners in vulnerable regions may find it increasingly difficult to sell or refinance, and property values could come under pressure as climate risks become more visible in the market. 

Brokers are encouraged to be proactive with clients – discussing climate risk, encouraging thorough due diligence on flood and landslide exposure, and helping buyers understand the long-term implications before making a purchase or refinancing.  

As Cotality’s Kelvin Davidson (pictured) observed, “The rubber is not hitting the road in terms of pricing.”  

However, as climate risks become more visible in property records and due diligence processes, some market analysts believe that pricing and lending practices may eventually adjust.