Westpac New Zealand will now factor a property’s natural hazard risk into its home lending decisions, the company said.
In a small number of cases, the means lending less against homes exposed to flooding, slips and coastal hazards.
Applicants for Westpac home loans will receive a short Natural Hazard Risk Insights report, based on the same data the bank uses for its own lending decisions. The data comes from New Zealand climate specialists Climsystems Powered by SLR.
The bank said the change won't be a blunt instrument. Sarah Hearn, Westpac NZ's managing director of product, sustainability and marketing, said the bank was not moving to risk-based pricing and did not expect to decline applications solely because of hazard risk.
“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,” Hearn said.
The move extends work Westpac began in July, when its general insurance partnership with Tower took effect. Customers quoting for home insurance through Westpac’s online banking can now see Tower’s hazard data for an individual property, covering flood, earthquake, sea surge and landslide. Those new policies are priced on Tower’s risk-based model. Existing Westpac policies underwritten by IAG have continued unchanged.
A buyer taking out a new Westpac mortgage and new Westpac home insurance on an exposed property will now have that risk shown in both the premium and the size of the loan. The two have different time frames. A home insurance policy runs for a year, while a mortgage can run for decades, which is why a lender wants its own long-term view of the risk.
Hazard checks are still far from routine for buyers. In a Westpac survey in July, only 63% of homeowners said they had actively looked for hazard information before buying their current home. A second Westpac-commissioned survey of 529 people in June found 90% thought such information was extremely or very important. However, 14% of homeowners and 32% of renters weren’t confident about where to find it.
Westpac also offers interest-free Greater Choices top-ups of up to $50,000 for resilience work, such as better site drainage or raising outdoor appliances above flood levels.
The change brings forward a conversation many brokers have only had at renewal. Insurance is a standard condition of home lending. Buyers looking at riverside, clifftop or beachfront homes now face two separate assessments of the same risk before they buy: one from the bank and one from the insurer. Brokers handling home and contents for these clients should expect questions on insurability and premium earlier, often before an offer is made.
Resilience work counts on both sides. Owners who have improved drainage or added retaining structures should document the work, because it may help with both the lender and the insurer. Westpac’s interest-free top-ups give clients a way to fund it.
The split between new and existing Westpac insurance also matters. Clients moving their insurance through the bank’s app will meet property-level pricing that their existing IAG-underwritten policies may not have reflected.
The move adds pressure for a consistent national picture of hazard risk. The Insurance Council has called for stronger rules on building in exposed areas. Research has also raised concern that banks could informally avoid lending in high-risk areas where insurance is uncertain. Westpac’s approach is a formal, disclosed version of that pressure, and the question now is whether other banks follow.
