Genworth suffers 22% fall in profit as borrowers turn away from high LVR loans
Genworth suffers 22% fall in profit as borrowers turn away from high LVR loans
Australia’s largest lenders mortgage insurer Genworth has reported a major fall in profits, as borrower behaviour and the housing market shifts.
Genworth’s profits fell 22.4% between 2016-17, capping off a difficult year for the LMI provider in which it lost its second-largest customer, Macquarie Bank, in April and began renegotiating its contract with NAB.
In its financial results presentation, Genworth blamed the poor result on difficulties in Western Australia, where unemployment and delinquencies have increased.
Genworth’s presentation also demonstrates how borrowers are moving away from high LVR loans that require LMI. APRA figures show $292bn of lending in 2016 was more likely to be under 80% LVR, up from $283bn in 2015, whilst loans of more than 80% LVR fell from $88bn to $83bn.
New insurance written by Genworth was also more likely to be for sub-80% LVR loans: 42% in the first quarter of 2017, compared to 33% in the same period of 2016.
Reducing high LVR loans has been a pressing priority for banks, as APRA follows international developments in raising capital ratios for high LVR loans. In their Review of Mortgage Broker Remuneration, ASIC proposed that commissions could be linked to LVR and several banks do factor in LVR into their pricing matrix. Deloitte’s 2017 Australian Mortgage Report suggested selective repricing by LVR was likely to increase this year.
Reducing or increasing rates on high LVR loans has particular relevance to first home buyers, who accounted for just 13.3% of new housing commitments in February, according to the Australian Bureau of Statistics.
Australia’s largest lenders mortgage insurer Genworth has reported a major fall in profits, as borrower behaviour and the housing market shifts.
Genworth’s profits fell 22.4% between 2016-17, capping off a difficult year for the LMI provider in which it lost its second-largest customer, Macquarie Bank, in April and began renegotiating its contract with NAB.
In its financial results presentation, Genworth blamed the poor result on difficulties in Western Australia, where unemployment and delinquencies have increased.
Genworth’s presentation also demonstrates how borrowers are moving away from high LVR loans that require LMI. APRA figures show $292bn of lending in 2016 was more likely to be under 80% LVR, up from $283bn in 2015, whilst loans of more than 80% LVR fell from $88bn to $83bn.
New insurance written by Genworth was also more likely to be for sub-80% LVR loans: 42% in the first quarter of 2017, compared to 33% in the same period of 2016.
Reducing high LVR loans has been a pressing priority for banks, as APRA follows international developments in raising capital ratios for high LVR loans. In their Review of Mortgage Broker Remuneration, ASIC proposed that commissions could be linked to LVR and several banks do factor in LVR into their pricing matrix. Deloitte’s 2017 Australian Mortgage Report suggested selective repricing by LVR was likely to increase this year.
Reducing or increasing rates on high LVR loans has particular relevance to first home buyers, who accounted for just 13.3% of new housing commitments in February, according to the Australian Bureau of Statistics.
