Mortgage Insurer braces for tough times ahead

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on November 06, 2020
Mortgage Insurer braces for tough times ahead

Photo by Harmen Jelle van Mourik on Unsplash

Genworth Mortgage Insurance is bracing itself for a rise of mortgage delinquencies and claims in the coming months, according to its latest earnings figures.

Genworth, one of Australia's leading providers of lenders mortgage insurance (LMI), has increased its reserves by $47.1 million in the third quarter of 2020 (three months to September 30).

This is an increase of 25% to $82.5 million since the onset of COVID-19 in Australia. 

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner occupiers.

Lender

Variable
More details
  • Min 30% deposit
  • No monthly or ongoing fees, add 0.10% for offset
  • Unlimited redraws

Variable Home Loan (LVR < 70%)

  • Min 30% deposit
  • No monthly or ongoing fees, add 0.10% for offset
  • Unlimited redraws
Variable
More details
REFINANCE ONLY
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
REFINANCE ONLY

Variable Rate Home Loan – Refinance Only

  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
Variable
More details
AN EASY DIGITAL APPLICATION
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
AN EASY DIGITAL APPLICATION

Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO ONGOING FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO ONGOING FEES

Yard PAYG Home Loan (Principal and Interest) LVR ≤ 80%

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of August 10, 2022. View disclaimer.

As at September 30, Genworth had over 31,000 active repayment deferrals from lenders, and reported many loans may be expected to experience difficulty following the end of deferral periods. 

Genworth chief executive and managing director Pauline Blight-Johnston said the COVID-19 environment is creating a high degree of uncertainty, but praised the effectiveness of this year's various government and bank support packages.

“We continue to support the repayment deferral programs, government job support packages and legal moratoriums that are assisting Australians at this time of need,” Ms Blight-Johnston said. 

“These programs are beneficial for the economy and Genworth’s business. They are delaying the development and progression of delinquencies and claims, providing Australians with some respite and time to recover.

"They do, however, reduce our visibility of anticipated ­future claims outcomes.”

Ms Blight-Johnston said Genworth has increased its reserving to compensate for this extra risk, and that Genworth still has a strong capital buffer to navigate future mortgage challenges. 

"We understand how important it is for us to play our part in the nation's rebuilding program, by continuing to support our customers, their borrowers and the broader community," she said. 

"Whilst there are initial signs of economic recovery, the lockdown in Victoria and continuing border closures in some states demonstrate that the impact of the pandemic still has a while to play out, so there remains considerable uncertainty about the ultimate impact on Australian borrowers and on Genworth's claims outcomes. 

"We will keep working together with our lender customers through this difficult and uncertain period, and beyond, to support Australian borrowers, helping as many people as possible to realise the dream of home ownership and stay in their home wherever possible."

Still a lot of mortgages in deferral 

Despite the original six-month mortgage deferral period ending, many home loan repayments are still frozen, based on recent big bank data:

Each of these figures from the biggest banks are above the benchmark set by the Reserve Bank, which recently predicted that just 15% of deferred mortgage customers would struggle to resume repayments.

What's worse is those with higher LVRs, mainly those above 90, are disproportionately affected by current mortgage deferrals compared to the overall home loan market, which presents a potential problem for LMI providers like Genworth. 

Over the September quarter, new insurance written was up 22% to $7.8 billion. 

See also: Have a mortgage deferral? Here's how your lender is expected to help when it ends




Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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William Jolly joined Savings.com.au as a Financial Journalist in 2018, after spending two years at financial research firm Canstar. In William's articles, you're likely to find complex financial topics and products broken down into everyday language. He is deeply passionate about improving the financial literacy of Australians and providing them with resources on how to save money in their everyday lives.

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