How much more will you pay for mortgage and insurance on a cheap suburban house?
Mortgage lenders already charge a premium for homes at risk from sea level rise. A 2022 study found that lenders charge higher interest rates for mortgages on properties exposed to greater sea level rise risk, and this premium is not explained by short-term default risk or borrower creditworthiness [1]. This means you could pay a higher interest rate for a cheap house in a flood-prone area, adding thousands of dollars over the life of the loan.
Homeowners insurance costs also rise after the Federal Reserve raises interest rates. A 2025 study shows that contractionary monetary policy (rate hikes) leads to higher homeowners insurance prices, and this effect is stronger in areas with high climate risk exposure [3]. So, if you buy a cheap house in a wildfire or hurricane zone, your insurance premiums could spike when the Fed tightens policy, making your monthly housing costs unpredictable and potentially much higher.
How does climate risk affect the value of your suburban home?
Climate risk doesn't just raise your costs—it can also threaten the value of your home. Banks are exposed to climate transition risks (like carbon taxes or regulations) through their loans to carbon-intensive industries, and a disorderly transition scenario could expose the average bank to losses equal to 9% of their loans [4]. If your local bank is heavily exposed, it could tighten lending, making it harder to sell your home or refinance.
Insurance companies also face climate risk through their investments. A 2023 study found that property and casualty insurers with larger exposure to high-physical-risk states also hold more 'brown' assets (fossil fuel-related investments) [5]. This means your insurer could be financially vulnerable to both physical disasters and a shift away from fossil fuels, potentially leading to higher premiums or even insolvency in a worst-case scenario.
About These Sources
This answer is built on 5 studies (2 peer-reviewed, 3 preprints) — published from 2022 to 2025, 2 from 2024 or later, 2 in Q1 journals, collectively cited 246 times — selected as the most relevant from 5 studies that passed quality screening, drawn from 44 papers retrieved from a database of over 500 million.
Sources used in this answer
Climate Change Risk and the Cost of Mortgage Credit
Mortgage lenders charge higher interest rates for properties exposed to greater sea level rise risk, and this premium is not explained by short-term default risk or borrower creditworthiness [1].
The Hidden Cost of Tax Regressivity at the Top
In a U.S. experiment with ~4,000 participants, informing people that the superrich pay lower total tax rates than others increased support for taxing the rich but decreased support for taxing the middle class [2].
Homeowners Insurance and the Transmission of Monetary Policy
Contractionary monetary policy (rate hikes) leads to higher homeowners insurance prices, especially in areas with high climate risk exposure, amplifying effects on home prices and mortgage applications [3].
U.S. Banks’ Exposures to Climate Transition Risks
U.S. banks' exposure to climate transition risks averages up to 9% of loans in a disorderly scenario, with a downward trend in lending to the riskiest industries [4].
Measuring the Climate Risk Exposure of Insurers
Property and casualty insurers with larger operational exposure to high-physical-risk states also hold more brown (fossil fuel-related) assets, linking physical and transition risk [5].