Consumers 'ripped off' by LMI greed

by Calida Smylie26 Feb 2014
Consumers are being “ripped off” by having to cover lenders mortgage insurance and it has to stop, said Finance Brokers Association of Australia CEO Peter White.

The industry veteran has been advocating for disclosure and portability in the LMI space for more than three years, but hopes the new government will make change in the next year, he told Australian Broker.

While FBAA recognises LMI as a necessary insurance, it has fought for a long time to remove the restrictive and unfair nature of it.

“We think that if we change LMI and its conduct and its lack of disclosure this will mean a more fluid marketplace for the whole industry. The refinance marketplace will become more active to what it is today because there is no barrier to impede the transaction, because you don’t need to pay another $20,000 to $30,000 for LMI.”

Issues surrounding LMI will form a large part of FBAA’s submission to the Murray Inquiry, which is due end of next month.

While LMI disclosure has already been drafted into a key fact sheet under the NCCP, there are other issues, such as borrowers having to pay LMI twice – especially to Genworth Financial and QBE – when refinancing, said White.

"We want the lenders and insurers to take this on board and do something for Australian borrowers. The industry is dragging their feet because they don’t want to do it. 

“People have to know, they are entitled to a refund under certain conditions, and it should be publically disclosed.

“It is just a rip off and it is not fair. We want fair play. We’re all big boys and girls, let’s all play nicely together and have it fair for the borrowers.”

White is looking forward to tackling the big issues in a year of change for the industry.

“I’ve never been shy of a fight, I used to teach martial arts when I was younger. So when it comes to taking them on, I can do that.”

Some lenders, such as Liberty and Homeloans, have recently offered loans with no LMI, aimed at first home buyers.


  • by MJL1959 26/02/2014 9:53:02 AM

    Pepper Homeloans has always offered No LMI loans.

  • by Rip-Off 26/02/2014 10:02:46 AM

    The mortgage insurance premiums keep increasing, yet the loan delinquency rates as reported remain quite steady. More and more borrowers have to cut back on their lending because when the ever increasing LMI premiums are added to the loan, the LVR easily exceeds lenders 97% limit. Also the out of control greedy Stamp Duty charges by state govt's is a huge disincentive for buyers. Genworth and QBE clearly monopolise the market and they know it. Once again, the consumer is being treated as "muppets" (reference to how Wall St traders viewed their clients/suckers)

  • by Country Broker 26/02/2014 10:06:21 AM

    Under the NCCP all commissions are to be disclosed . Will the lenders as a credit provider disclosed the commissions that they earn from each deal that is LMI insured ? I
    The real solution for this is to have the governments both state and federal start their own LMI and create some real competition , it would be a profitable Government Owned enterprise . The Old HLIC was sold off to GE / Genworth , and I doubt the wet economic stance of the federal government will see that happen .
    Something needs to be done to A; Stop the disparity in pricing for premiums between lenders , B ; Reduce premium costs . C; Somehow allow portability with the insurers approval and perhaps an small administration fee for refinance loan.