Not the right kind of rain

Not the right kind of rain

In the south west of the UK it looks like boat prices rather than house prices will be rocketing this year. But how will the deluge that January and February brought really affect the UK’s recovering economy?

A huge geographical area was impacted, from the South West up the M3 and M4 corridors as far as the West Midlands. This area accounts for 13% of the UK’s GDP – a month’s loss of output in the region could reduce GDP by as much as 1%, costing the UK £13.8 billion. Alarming though these figures sound, Bank of England Governor Mark Carney counselled calm on the issue. He expected the economic effects to the country as a whole to be short term due to loss of output, but with a recovery shortly afterwards as the repairs kick in – which will provide a gain to GDP. Even the damage to food crops should not impact hugely upon food prices for the UK as a whole, as we import so much of our food. The cost to the local economies and of course the human cost, are likely to be much greater. Affected householders will have initially been most concerned about repairing the damage wrought by the weather – but once they’ve ‘made good’ they will be keeping a weather eye on the insurance market.

Insuring houses on a flood plain has always been difficult, but a new agreement between the government and insurers looks to ensure that householders can obtain affordable home insurance. Under a scheme called Flood Re, from 2015 annual premiums will be capped and payouts for flood damage will come from a central pool of money managed by the insurance industries. The scheme covers 350,000 households which the Environment Agency says are at high risk of flooding. The Association of British Insurance says the cap will be £210 a year for properties in council tax bands A and B, rising to £540 a year in band G. The premiums will go in a central fund and be used to pay out claims to any insurer. In theory, some people could see their costs go down once the cap comes. Homes built since 2009 are not covered by the scheme however, to avoid incentivising building on flood plains, and neither are homes in council tax band H. If you’re in an affected area and looking to renew, shopping around is vital to secure the best deal for you. An easy way to do this is to contact a broker such as Towergate Insurance with access to a huge range of insurers. There are other schemes made available by the government and by banks to help those affected by the bad weather. David Cameron announced a comprehensive package of new measures to help hard-working homes, businesses and farmers hit by the floods.

The measures included:

  • A £5,000 “repair and renew” grant for all affected homeowners and businesses – this will top up any money received from insurers to ensure flood resilience is built into homes and businesses as they are repaired.
  • A separate Business Support Scheme worth up to £10million for SME businesses in areas affected by the floods.
  • All affected businesses will get 100% business rate relief for 3 months and will also get an extra 3 months to pay the business taxes they owe to HMRC as they get back on their feet.
  • A £10 million fund for farmers suffering water-logged fields to help restore it to farmable land as quickly as possible.
  • A total commitment in excess of £750 million from the major banks to provide financial support to business and individual customers affected by the floods.

Of course all these measures have to be paid for somehow – and if the economy has already been hit by a loss of output due to the flooding then 100% business rate relief for 3 months is not going to help the Chancellor balance his books. It’s not just the government providing help to affected householders and businesses though. The UK’s major lenders were quick to act and offered support for personal and business customers who were affected, including specialist helplines, repayment holidays and help locating temporary accommodation.

Royal Bank of Scotland and NatWest offered customers a three-month repayment holiday, while Nationwide set up a helpline for borrowers (0845 601 1184) who need help with mortgage repayments or wish to request a temporary overdraft or to increase their current overdraft. HSBC offered a three-month repayment holiday for customers and waived or reduced fees on loans and overdrafts. Santander allowed mortgage customers a three-month repayment holiday or offered to convert their deal to an interest only loan. Customers were also able to extend their overdraft without paying a fee. Barclays allowed mortgage customers to apply for a repayment holiday of up to six months and personal customers without an overdraft were also able to apply for an emergency facility. Lloyds Banking Group offered a repayment holiday of three-months and it waived any fees if a borrower extended their overdraft. It is also offered alternative accommodation for personal customers who were unable to stay in their homes due to flood damage. While all these measures are welcome, it’s worth looking at a longer term plan. It looks likely that we will see more of these extreme weather events in the future, so how do you go about protecting yourself and your family from future trouble? Business continuity insurance can help mitigate the effects of such catastrophic events. Talk to one of our advisors to see if there’s a policy which will cover you against similar issues in the future. So while we can’t do anything about the British weather, we can plan for the worst, while we hope for the best! Now, where are my wellies?

 

Your property or home may be repossessed if you do not keep up repayments on your mortgage.

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