“I’ve seen mortgage insurance premiums in excess of $10,000 many, many times – sometimes in excess of $20,000. It’s not a cheap thing and no one can clarify how and why the premium is loaded. Nobody ever gets the inside information on how that happens.”
Genworth chief commercial officer, Bridget Sakr, confirmed that the insurer recently increased its pricing, but asked that the exact figures not be quoted due to the complexity of the pricing system.
“We price over a long-run cycle; we look at the next ten years. We have data going back to 1965 and we look at how things perform over different market indicators. Yes, we have increased our pricing using data looking back and self-employed borrowers are a segment that we have priced accordingly.”
Sakr says she wants brokers to realise that LMI premiums are capitalised on to the loan.
“At the same time, mortgage insurance plays a role so a client is able to buy a home sooner. In actual fact you’re looking at a cup of coffee a day. When you look at other insurances out there, your TV bill is more expensive than that. People go on about the prices going up, but we’re pricing for cycles where we’ve seen extreme deterioration. They need to put it in perspective – [borrowers] are moving into a home a lot sooner. That’s something brokers don’t ever seem to talk about: there’s a segment of the market that would never be able to afford a home without mortgage insurance.”
But Lee isn’t convinced.
“Last time I checked, there were 1,060,000 small business in Australia – so are we saying that most of the Australian business sector is a risk? And if so, how did they come up with that calculation? I think this is a real slap in the face for Australia from an American company because they can get away with it.”