The Council of Mortgage Lenders has this week called upon the new Chief Secretary to the Treasury, Paul Boateng, to increase spending on flood defences, in line with the Government's own recommendations.

The CML's demands follow publication of figures by the Office for National Statistics showing that 11% of all new dwellings built in England between 1997 and 2000 were in areas defined as at flood risk by the Environment Agency.

Lenders and insurers are becoming increasingly concerned about possible widespread flooding of people's homes. Unless there is positive action by the Government, areas that are regularly flooded may become blighted because people cannot get insurance, with the result that their properties become unmortgageable. Obviously, this scenario has the potential to cause the complete collapse of some local markets.

Insurers have agreed to continue to offer cover to existing policyholders in flood risk areas until the end of this year, but there is evidence of premiums and excesses are rising. Someone selling a property in an area at risk of flooding may find that potential new owners have problems in getting insurance. And it is possible that, from the end of this year, there will be a small number of areas where insurers are not willing to offer cover at all.

The CML is calling on the new Chief Secretary to the Treasury to approve the spending of between £120 and £140 million on flood defences to maintain present standards, as recommended in the Government s own National Appraisal of Assets at Risk, carried out last year for the Department of the Environment, Food and Rural Affairs.

The CML's Deputy Director General Peter Williams said: "The ability to obtain insurance at a reasonable cost is a key requirement for both lenders and borrowers. Without the protection of insurance, the lender's security in the property is threatened, making it virtually impossible to obtain a mortgage. Even if borrowers could get a loan for the property, they would be extremely vulnerable if they had to meet the costs of any significant flood damage from their own pockets.

"Individuals cannot generally be responsible for protecting their properties from the dangers of flooding, and the need to invest in flood defences to safeguard national assets has already been acknowledged in the Government's election manifesto. The pressure to find land to meet housing demand means that more homes are likely to be built where there is a risk of flooding, so investment in proper defences is essential."