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
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
ZERO APPLICATION FEESFEE FREE OFFSET

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

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
ZERO APPLICATION FEESFEE FREE OFFSET

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

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
FixedMore details
USE A MARKET LEADING APP TO HELP YOU PAY OFF YOUR LOAN SOONER

Fixed Home Loan 1 year (Principal and Interest) (LVR < 80%)

  • Make up to $20,000 additional repayments per fixed term
  • Redraw available – lets you access any extra loan repayments you’ve made
  • Choose to rate lock for 90 days (fee applies)
USE A MARKET LEADING APP TO HELP YOU PAY OFF YOUR LOAN SOONER

Fixed Home Loan 1 year (Principal and Interest) (LVR < 80%)

  • Make up to $20,000 additional repayments per fixed term
  • Redraw available – lets you access any extra loan repayments you’ve made
  • Choose to rate lock for 90 days (fee applies)
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Variable Owner Occupied, Principal and Interest (Refinance Only)(LVR <75%)

  • No application or ongoing fees.
  • 100% free offset sub account.
  • Fast online application, approval in minutes not weeks.
  • Mobile app, Visa debit card, Apple and Google Pay
  • Refinance loans and variable rates only.
REFINANCE IN MINUTES, NOT WEEKS

Variable Owner Occupied, Principal and Interest (Refinance Only)(LVR <75%)

  • No application or ongoing fees.
  • 100% free offset sub account.
  • Fast online application, approval in minutes not weeks.
  • Mobile app, Visa debit card, Apple and Google Pay
  • Refinance loans and variable rates only.

Rates correct as of January 26, 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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