The mining slump has caused a sudden rise in mortgage defaults

Image
Mark Metcalfe/Getty Image

Home loan delinquencies in mining areas of Queensland and Western Australia is dragging on the profits of mortgage insurance group Genworth.

Genworth, which writes insurance for people who take out high loan to valuation mortgages, reported a 25.4% fall in net profit to $113 million for the half year to the end of June.

CEO Ellie Comerford says there were higher losses in parts of Queensland and Western Australia as the economy continues to transition away from resources sector-led growth.

“The business is responding to these dynamics by focusing on risk management and the execution of our strategic priorities,” Comerford says.

“We remain committed to working with our customers and other stakeholders during a period of heightened regulatory focus on the Australian mortgage market and lending standards.”

Australia’s regulators have been moving to reduce the number of property loans, particularly those for investment properties, and is forcing the banks to hold more capital.

The loss ratio rose to 22.1% from 19.6% mainly due to an increase in the number of delinquent loans.

Net claims were $49.9 million compared to $41.7 million in the same six month the year before, as this chart shows:

Image

Genworth says it continues to be cautious about areas of the economy affected by the slowdown in the mining sector and associated industries.

And the company is monitoring the Queensland and Western Australia where economic conditions are not strong.

The company declared a fully franked interim ordinary dividend of 12.5 cents per share and a fully franked special dividend of 18.5 cents.