Mortgage insurance rate hike
The increase, which can add thousands to the cost of buying a home, comes despite falling mortgage defaults, as borrowers are cushioned by low interest rates.
Lenders' mortgage insurance protects banks against losses from soured home loans. Banks often require buyers to purchase a policy if they are borrowing more than 80 per cent of a property's value.
In a sign of the strong profits being made in the local industry, QBE said on Tuesday that its Australian LMI business had pushed through price rises of 9 per cent this year.
Chief executive John Neal explained the increase by saying QBE expected more volatility in the housing market in years to come.
"Our assumptions are not that there's going to be a housing price crash in Australia but ... certainly the next two to three years there's a little bit more volatility," he said.
In Australia, QBE and US company Genworth control about 75 per cent of the market for lenders' mortgage insurance.
Mr Neal said QBE's pricing was similar to that of Genworth - and it reflected long-term trends.
Frequently Asked Questions about this Article…
QBE has raised the price of lenders' mortgage insurance in Australia by 9% this year, saying the increase reflects expectations of greater long‑term volatility in the housing market.
QBE says the price rise is based on expected future volatility in the property market over the next two to three years, not current default levels; the company expects more ups and downs in house prices even though recent defaults have fallen thanks to low interest rates.
Lenders' mortgage insurance protects banks and lenders against losses if a home loan goes sour. It is a policy the lender holds (often paid for by the borrower) to cover the lender’s risk on high‑loan‑to‑value loans.
Banks commonly require lenders' mortgage insurance when a buyer is borrowing more than 80% of a property's value (i.e., when the loan‑to‑value ratio exceeds 80%).
A 9% increase in mortgage insurance premiums can add substantially to the upfront or ongoing cost of buying a home — in some cases adding thousands of dollars to the total cost of obtaining a mortgage, particularly for buyers with deposits under 20%.
John Neal said QBE does not assume there will be a housing price crash in Australia, but he expects a bit more volatility in the next two to three years, which is part of the reason for the pricing change.
QBE and US company Genworth together control about 75% of the Australian market for lenders' mortgage insurance, making them the dominant providers in the sector.
Yes — QBE said its pricing is similar to Genworth’s and that the recent increases reflect long‑term trends in the industry rather than a company‑specific move.
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