Mortgage Insurer braces for tough times ahead

author-avatar By 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
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
VariableMore details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
VariableMore details
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
VariableMore details
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^

Rates correct as of October 17, 2021. 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 which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

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.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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author-avatar
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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