Australia: Climate change, natural disasters posing greater risk to mortgages: Moody's

Source(s)
Sydney Morning Herald, Fairfax Digital Network

By Shane Wright and Clancy Yeates

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Moody's on Monday released research saying an increase in natural disasters across Australia could prove an economic risk to banks and their customers. Queensland and NSW had been the worst affected by disasters such as floods and fires since 1970, Moody's said, with an increasing number of all types of natural disasters over the past 49 years.

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"The frequency of natural disasters in Australia is increasing and climate change is likely to result in more extreme weather events," it said. "Natural disasters can disrupt economic activity and therefore reduce borrowers' incomes, which can in turn lead to mortgage delinquencies and losses. Natural disasters can also result in significantly lower property values in affected areas."

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Insurance and reinsurance companies have stepped up warnings that climate change is posing a risk to their business models and could make insurance too expensive in some areas most exposed to natural disasters.

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"Prices have continued their prolonged decline in Western Australia and the Northern Territory and so the prevalence of negative equity for borrowers in those regions has continued to rise," the [Council of Financial Regulators] reported.

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