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​LMI providers ‘gouging’, more competition needed: Brokers

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Australian Broker | 16 Dec 2013, 08:00 AM Agree 0
Brokers are calling for further competition in the LMI space as premiums continue to rise, while LMI providers have defended the price hikes.
  • GC | 16 Dec 2013, 09:52 AM Agree 0
    Australia should not be proping up the US market. The current LMI area amounts to no more than legal theft. This whole area of the financial sector needs to be overhauled. As far as I am concerned the current LMI providors should be thrown out of the country and the Govt. set up up a fair and reasonable structure to take over this element. People have been screwed over long enough. Current LMI fees are outrageous and the crap needs to stop.
    I still ask the question - why can I fully insure a $700K property for a few hundred dollars yet it could cost me approx $20K (ball-park) to insure a $630K mortgage where the values increase thereby reducing the risk. The LMI companies know they are ripping off the clients and it really needs to stopped.
  • Regional Broker | 16 Dec 2013, 09:56 AM Agree 0
    The Federal Government need to become involved here as they did in the 1970 era and get other entrants into the market OR start up HLIC again . This is just killing the first home buyers
  • James | 16 Dec 2013, 09:56 AM Agree 0
    Something certainly needs to be done. 2 lmi providers with very similar policies and pricing is not enough. This space needs competition like anything else. The banks will approve many things below 80% that suddenly cannot be done at 80.1%
  • Ray C | 16 Dec 2013, 10:15 AM Agree 0
    The existing product providers should provide a greater range of price options built on loan structure. A 15, 20 and 25 year P & I from day one should cost less then a 30 year P & I. Also P & I should be cheaper then I/O. Please LMI start thinking commercially.
  • Positive Broker | 16 Dec 2013, 10:25 AM Agree 0
    Yes, LMI is an "enabler" but in reality the cost is just not justified for many first home buyers. LMI premiums at 95% generally leave first homebuyers with next to no equity in the property. Competition is desperately needed.
  • Papery | 16 Dec 2013, 10:43 AM Agree 0
    Yep...Ive got one at the moment too.... Quality applicants....$580k house & land LMI around $23k....no QBBG as they are not FHB....
  • mac | 16 Dec 2013, 10:57 AM Agree 0
    Just dug up the old Genworth rate card for CBA from 2007. Not doubled but pretty close at 75% - 80% increases for above 90% LVR in the $500K - $1,000K band. Speaks volumes!

    LVR band 2007 rate 2013 rate % Increase
    92-94 2.311 4.025 74.17%
    94-95 2.432 4.370 79.69%
  • Gary | 16 Dec 2013, 11:11 AM Agree 0
    The GFC was a US/Europe problem. I can't see why Australia needs to subsidize those markets by paying outrageous LMI premiums.
  • Cynical | 16 Dec 2013, 11:16 AM Agree 0
    lets face it, it amounts to industry sanctioned robbery. Where is the need for LMI. If the borrower goes belly up, its not like they can do a runner with the property. Yes the lender may have to deal with market forces in order to recoup their funds. But surely this is preferable to the current system of milking the buying public. The great Australian dream, HA what a joke. Its more like the great Australian nightmare. $346.5 million net profit between the 2 providers. Where is the actual risk when the property is a permanent fixture. Money for jam I say
  • Melo | 16 Dec 2013, 11:30 AM Agree 0
    Yep the 2 LMI providers hit them hard,hit them low,hit them below the belt ,cry poor and than charge 3% premium for pleasure.Amazing you get building insurance for $1m property at $1000 and $900K loan at 90% would cost you over $30,000?
  • LBD | 16 Dec 2013, 11:34 AM Agree 0
    LMI is insurance,and with all other insurance options in the market we can pay monthly, quarterly or yearly. In the USA the LMI is paid within the monthly home loan repayment. Why not in Australia? Just imagine your response to your home building insurer or car insurance provider insisting on 30 years of insurance upfront. Its has to be changed.
  • Incognito | 16 Dec 2013, 11:38 AM Agree 0
    Can we all chip in and get an actuarial opinion on Australian LMI and pricing?

    That is the only way to prove what we all suspect.

    We can then put it out to the world to come in and shake this cartel up..

    I would be happy if the MFAA threw 10k or 20k at it..

    I would happily donate $100 to it if everyone else did? (if someone reputable took a collection for it..)
  • Adam Brandt | 16 Dec 2013, 12:45 PM Agree 0
    There is plenty to be said about our two mortgage insurers. I understand they are into risk management, but I really find it hard to understand why they are unaccountable when they decide to say no. I had a loan declined by Genworths Score card, sorry the lenders assessor thought it was a good offering but the decline was "customer profile". The best we could work out that the system didnt like the deal because the client has moved around to 3 different living locations in the past three year. The client is a Policewoman and is posted where the Police force sends her. No further discussion. I want these insurers held to account and not hide behind a "score card. The current system does not hold these guys to account.
  • Broker | 16 Dec 2013, 04:07 PM Agree 0
    The increases over the past 5 years simply cannot be justified, it amounts to licensed theft.
  • L3nder | 17 Dec 2013, 11:16 AM Agree 0
    What a great business, a monopoly on the market, no competition, a "Price maker" not a "price taker", a single product offering, banks force the policy and the customer pays, deals "walk in the door" and are "cherry picked", and when claims are made there is always the borrower to take legal action against for recovery.
    Who wants to be a mortgage insurer?
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