Lenders must develop view on fracking, leading surveyor warns

John Hewitt Jones

October 6, 2016


Chartered surveyor e.surv has warned lenders must form a view on fracking after the government gave the green light to drill at a site in Lancashire today.

Speaking to Mortgage Introducer, Richard Sexton, director of business development at the chartered surveyor e.surv, underlined the need for lenders to offer their customers clarity over how the new form of energy could affect their home loans.

Today saw the government give the go-ahead for the first fracking test site in the UK, raising concerns about the possible impact it could have on house prices.

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Sexton warned of a short-term drop in house prices and transaction values, highlighting the effect this could have on homeloans.

He said: “Lenders really will need to form a view on this, as they have obligations to lenders, borrowers, and their shareholders.

“It’s certainly one for their credit risk departments; they will need to form a policy on how they approach lending in fracking areas.

“There are two groups of customers this will effect. Firstly, it’ll be crucial to understand what the effects of fracking will be on house prices in surrounding areas.

“Secondly, lenders will need to understand what consequences the fracking may have for existing customers.

“If someone lives in a property next to a fracking area and house prices are affected they may decide it isn’t worth anything and could stop paying their mortgage.”

He added: “What we find on any big infrastructure project like fracking or HS2 is that there is an immediate response – people have a concern about the consequences of the construction work taking place, causing a short-term drop in price and transaction values.

“However, once the infrastructure project occurs, figures generally rebound unless something goes wrong or the project sees other significant developments.”

The news follows the publication of a report by the University of Bristol earlier this year suggesting fear of earthquakes caused by shale gas exploration could see a 4% reduction in house prices within a 30-mile radius of fracking sites.

The Department for Communities and Local Government today announced that Communities Secretary Sajid Javid had approved plans for fracking to take place at the Preston New Road site run by Cuadrilla Resources, allowing shale rock to be fracked horizontally for the first time.

The decision by communities secretary Sajid Javid will overturn planning decisions taken by Lancashire County Council.

A final verdict on a second site in Roseacre Wood has been delayed to allow the company to give further evidence about the impact it would have on traffic.

Cuadrilla Resources issued a statement welcoming the decision. It said: “Cuadrilla welcomes the decision by Secretary of State for Department for Communities and Local Government Sajid Javid to grant planning consent for its applications to drill, hydraulically fracture and test the flow of gas from up to four exploration wells at its Preston New Road site in Lancashire.”

Opponents to fracking warning the pressure and chemicals involved in the process may put the landscape and air quality at risk.

Hannah Martin, a campaigner from environmental lobby group Greenpeace, said: “This fudged decision shows the government is struggling to force fracking on a reluctant nation. Fracking will put our countryside and air quality at risk. Digging up more fossil fuels that we can’t burn if we are to honour the international agreement we signed in Paris and is coming into force next month makes little economic or environmental sense.”

Trillions of cubic feet of shale gas are believed to lie underneath the UK, and more than 200 energy companies have been awarded onshore exploration licenses.

Supporters of fracking say the energy form increases the UK’s energy security, and natural gas will help the country transition towards greener energy.