Climate Change Isn’t Just an Environmental Issue — It’s a Mortgage Time Bomb

The financial foundation of North America’s housing market — long-term, fixed-rate mortgages — may be cracking under the pressure of climate change.

While most Canadians focus on interest rates and inflation when planning for a mortgage, experts are now sounding the alarm on something far less visible but just as dangerous: the crumbling reliability of local insurance markets in the face of wildfires, floods, and other climate disasters.

According to a Financial Times letter from Bill Green, a former Federal Home Loan Bank official, increasing numbers of homeowners in the U.S. and Canada are being dropped from their home insurance plans after making claims related to natural disasters. And without proper insurance, mortgages are no longer secure for lenders — or affordable for borrowers.

Insurance Withdrawals Could Lead to Mortgage Defaults

Let’s say your home in British Columbia is affected by a wildfire. You file a claim, and your insurer pays out. But next renewal? They back out. No insurance means your lender may demand you find alternative coverage — often at 2x to 3x the original premium. If you can’t? You’re now facing potential default, even if you’re current on your mortgage payments.

And it’s not just happening in small towns. Regions across Canada — from Nova Scotia’s flood-prone coastlines to B.C.’s fire zones — are now in the crosshairs.

🌪️ Climate Event: Wildfires in BC or Alberta

🏚️ Insurance Impact: Insurers withdraw coverage or hike premiums

💸 Mortgage Consequence: Monthly payments rise due to escrow increases

📉 Long-Term Risk: Higher default risk, lower resale value

🌪️ Climate Event: Floods in Nova Scotia / Quebec

🏚️ Insurance Impact: Flood insurance becomes mandatory or unaffordable

💸 Mortgage Consequence: Lenders may deny mortgage renewal

📉 Long-Term Risk: Property becomes harder to insure or sell

🌪️ Climate Event: Extreme storms or hail

🏚️ Insurance Impact: Frequent claims lead to non-renewal

💸 Mortgage Consequence: Borrower forced into high-risk pool insurance

📉 Long-Term Risk: Decreased affordability for new buyers

🌪️ Climate Event: Heatwaves / droughts

🏚️ Insurance Impact: Structural risk & fire risk increase

💸 Mortgage Consequence: Higher appraisals rejected by lenders

📉 Long-Term Risk: Regional real estate downturns

Risk: Home insurance dropped after natural disasters
Result: Forced into high-cost coverage or uninsured
Mortgage Impact: Lender may call the loan or hike escrow
Long-Term: Property values in risky zones may collapse

Why It Matters for Canada’s Mortgage Market

Canada’s mortgage system is heavily reliant on insured lending, especially for first-time homebuyers. But if insurers start pulling back or demanding outrageous premiums in high-risk zones, the ability to secure a mortgage itself comes under threat.

For lenders, this means rising default risk. For homeowners, it could mean skyrocketing monthly costs — even if interest rates fall.

What You Can Do as a Borrower

If you live in or plan to buy in a climate-sensitive region:

Review your insurance annually — don’t assume renewal is guaranteed
Talk to a broker about what happens if insurance is withdrawn
Factor climate risk into property value and future saleability
Consider flood/fire retrofits that might help reduce premium risks

🌍 Concerned About Climate Risk?

As climate events become more frequent, it’s crucial to understand how insurance gaps can impact your mortgage. Speak with a trusted Canadian mortgage expert today to make sure your loan — and your future — are protected.

Talk to an Expert

✅ Step	Why It Matters
Check your current home insurance renewal date	Avoid last-minute surprises and coverage gaps
Ask your provider if you’re in a high-risk zone (flood/fire)	Helps plan for potential premium hikes or non-renewals
Get quotes from at least 2 alternative insurers	If dropped, you’ll already have backup options
Review your mortgage contract for insurance clauses	Know what your lender can demand if insurance lapses
Consider improvements (e.g. sump pump, fire-proof roofing)	Can reduce premium risk or make insurance easier to renew
Ask your mortgage broker about climate risk exposure	Stay ahead of future lender concerns in risk zones

Final Thoughts

Mortgage security in Canada has always rested on the stability of the insurance system. But with wildfires, floods, and climate volatility increasing every year, the cracks are starting to show.

It’s time to treat climate change not just as an environmental challenge — but as a financial one, especially for anyone carrying a mortgage. Because in today’s world, a paid mortgage may not be safe without a valid insurance policy.