CHART: Tighter lending for property is crushing mortgage insurance

Charlie Bryan / Barcroft Images / Barcroft Media via Getty Images

Australia’s mortgage insurance business is taking a hit because banks and other lenders are taking a more conservative approach to mortgages.

Genworth just released its quarterly update, showing a sharp fall in new business. There are fewer high loan-to-valuation loans being approved, those for which banks require mortgage insurance.

A short time ago, Genworth shares were down more than 7% to $2.805.

New insurance written by Genworth fell 28.2% to $6.1 billion in the third quarter of 2016. The year-to-date number is $20.1 billion, down 23.3%.

Gross written premiums fell 25.8% to $92.5 million and profit was down 28.7% to $46.7 million.

“Overall, the high loan-to-value ratio (LVR) market is down,” says CEO Georgette Nicholas. “The trends we saw develop in the first half of 2016 continued to impact our results for the third quarter.”

Here’s how the percentage of higher loan-to-valuation loans is falling. The 2016 stack below is for the half year:

“Queensland and Western Australia continue to have elevated delinquency development from economic pressure, in particular in mining related regions,” says Nicholas.

“During this cycle our focus continues to be on maintaining our risk management discipline and helping our lenders support borrowers in hardship.”

Residential mortgages dominate the loan books of banks and the financial pressure from paying off a home loan is increasing in Australia following the decline in the mining industry.

The banks have responded by tightening the requirements to get home and investor loans. Some insist on a more modest loan-to-valuation ratio.

At Genworth, the delinquency rate increased in the September quarter to 0.47% from 0.39% a year ago.

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