How Responsive Are Mortgage Lending Conditions to Flood Risk? The Case of the Netherlands

ABSTRACT We study the link between flood risk and mortgage lending in the Netherlands, a country where approximately 60% of the population resides in flood‐prone areas. Using over 100,000 securitised mortgages issued from 2013 to 2023, our study concludes that credit terms are indistinguishable between areas with and without flood risk. When we use the 2021 river flood disaster in a diff‐in‐diff setting, our results suggest that lenders temporarily (for about 6 months) raised interest premiums and partially reduced LTVs. It appears that regulatory mandates are needed if central banks want commercial banks to price climate risk into their lending.