Borrowers are having to pay larger housing deposits in 2016 as lenders re-evaluate their risk appetite, according to Genworth.
Genworth Mortgage Insurance Australia Limited is Australia’s largest provider of Lenders Mortgage Insurance (LMI). LMI protects the lender when borrowers default on their home loans.
According to the Chief Executive Officer, Ms Georgette Nicholas, approximately 17 per cent of new business written is to cover loans with a loan-to-valve ratio (LVR) of 90 per cent – down from 29 per cent in the first quarter 2015.
Due to a slowdown in new business volumes and the decline in the LVR mix, Genworth Australia’s first quarter net profit has fallen 25 per cent to $67.3 million, compared to $89.5 million in the same quarter of 2015.
In a first quarter 2016 earnings statement, Glenworth stated, “The overall portfolio is performing in line with expectations. Performance in NSW and Victoria remains strong, while pressure in WA and Queensland continues as those regions navigate through tough economic conditions.”
But it is not only the banks that are re-evaluating the risks.
Genworth Financial Inc’s CEO Tom McInerney said in an interview in New York, “We’ve cut back in writing in Western Australia and Queensland.” Genworth Financial owns 52 per cent of the Australian business after floating it in May last year.
McInerney says, Genworth has become more “more wary” of Australia’s housing market due to our ties in a macro sense to China and Commodities.