Earlier this year one of Australia’s big 4 banks ended their long-term mortgage insurance partnerships with both the major LMI providers (Genworth Financial and QBE) and struck a deal with a new overseas based player. This is relevant because it is bringing some long needed competition back to the LMI market. Finally.
Under the new arrangement home loans with an LVR of more than 90% will be insured by Bermuda-based Company Arch Capital Group, while 80% to 90% LVR mortgages will continue to be covered by the lenders internal insurance arm.
As a recap Lenders Mortgage Insurance (LMI) is an insurance taken out to protect the lender against monetary loss on a loan. LMI is usually applicable when borrowing more than 80% of a property’s value and the cost in almost all cases is passed through to the borrower.
Australia’s lenders mortgage insurance (LMI) industry was for many years in what I would call a comfortable duopoly with just two main players being QBE and Genworth. To give you an example of their market power between 2007 and 2015 premiums increased by about 80% with both providers matching each others increases. The new entrant to the market has more competitive premium rates for most scenarios above 90% LVR which means you can save considerable money as per the example at the bottom of the page.
On the loan credit policy side previously Genworth and QBE have maintained very similar policies over the last few years meaning if one insurer declined your home loan application, the other would in most cases automatically do the same. This was done not only because of the similarity of their policies but also as a matter of general policy. A real travesty for those who believe in competition and consumer rights. A new LMI provider also means greater opportunities for credit worthy borrowers to have their loan approved.
Example:
Lender |
Insurer |
Premium (Including Stamp Duty) |
A |
New LMI Provider |
$25,281 |
B |
Genworth |
$31,104 |
C |
QBE |
$32,762 |
You can see here the difference between the highest and lowest premium is over $7000.
Please feel free to contact us to see if we can save you some serious $$ on LMI and get you a good deal on everything else about your loan at the same time. You can fill out an enquiry form here or call me on 1300 711 054.