Property natural hazard risks are becoming a central factor in home loan approvals as Westpac NZ introduces property-level risk reports into its mortgage lending process, NZ Adviser reported.
The bank is investing in climate data supplied by New Zealand-based climate specialists ClimSystems Powered by SLR, according to Mirage News. Applicants will receive a short Natural Hazard Risk Insights report detailing the flood and landslip risks assessed for the property they want to buy, BusinessDesk reported.
About 2% of the properties Westpac lends against are considered at very high risk of natural hazards, 1News reported. Sarah Hearn, Westpac NZ managing director of product, sustainability and marketing, explained the strategy behind the new reports.
“We want to support our customers to make good decisions,” Hearn said. “However, in a small number of cases, it may mean the amount we’re comfortable lending on an at-risk property is less than it may previously have been.”
Lending limits and pricing approaches across banks
While Westpac is adjusting its risk appetite, the bank is not moving to risk-based mortgage pricing, BusinessDesk reported. Jo McGregor, Westpac’s head of consumer lending and insurance, said that the lender does not expect to decline applications solely on the basis of risk.
“She couldn’t provide further metrics to illustrate the extent to which Westpac was changing its risk appetite, saying the bank would consider how much it lent against risky properties on a case-by-case basis,” the NZ Herald reported.
A Kiwibank spokesperson acknowledged that climate risks remain an important and evolving issue, and noted the bank is continuing to monitor developments and industry discussions, according to 1News.
Independent climate economist Dr Belinda Storey welcomed Westpac publishing its risk data, telling 1News that many buyers underestimate long-term property vulnerabilities.
“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,” Storey told 1News.
Customer uncertainty over property hazard data
A June survey commissioned by Westpac and conducted on the Ideally research platform found that 90% of 529 respondents believe natural hazard information is extremely or very important when evaluating a property, Mirage News reported. However, 14% of current homeowners and 32% of renters stated they lacked confidence about how or where to find that data.
Property-level hazard information is already accessible through local councils, Land Information Memorandum reports, insurers, and the Natural Hazards Commission, BusinessDesk reported. Since July, Westpac customers applying for home insurance through the Westpac One online banking platform have also been able to access Tower Insurance hazard data for specific properties, according to Mirage News.
To help address physical property vulnerabilities, Westpac offers interest-free lending through a Greater Choices home loan top-up, enabling mortgage customers to fund resilience improvements like better site drainage or raising outdoor appliances above potential flood levels, Mirage News reported.
Banks and government assess climate risks to housing
The Reserve Bank of New Zealand has indicated that banks are considering restricting loan top-ups or limiting loan-to-value ratios on high-risk properties, while government reports warn that roughly 10,000 homes could become difficult to insure by 2035.
The Council of Financial Regulators—comprising the Reserve Bank, Treasury, Commerce Commission, Financial Markets Authority, and Ministry of Business, Innovation and Employment—has concluded a review of the insurance and banking sector’s exposure to climate risks, the NZ Herald reported.
McGregor said that data-sharing barriers between banks and insurers continue to complicate oversight, as privacy rules have typically been cited in the discussion over data-sharing between banks and insurers.
Common questions about property hazard lending
How much will Westpac lend on a high-risk property?
Westpac does not use set loan-to-value ratios for risky properties. Instead, the bank assesses individual properties on a case-by-case basis, which may occasionally result in offering a lower loan amount than previously permitted, according to Mirage News and the NZ Herald.
Are other banks changing their mortgage rules for climate risks?
Kiwibank has said that it is monitoring industry developments and assessing climate implications for customers, while the Reserve Bank has flagged that banks are considering broader restrictions on loan top-ups and high-risk lending criteria, 1News reported.
Where can homebuyers find natural hazard reports independently?
Homebuyers can access hazard information directly through local council records, Land Information Memorandum reports, private insurers, and the Natural Hazards Commission, according to Mirage News.
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