Mortgage Borrowers Hit Hard by LMI Premiums
Lenders mortgage insurance (LMI) premiums have skyrocketed, increasing by 50% in the last 12 months.
This form of insurance affects nearly 25% of all homeowners who have taken out a home loan. It is required when a homebuyer has a deposit of under 20%. It’s put in place to protect the lender, and it can’t be transferred or refunded if a borrower decides to switch lenders and they have less than 20% equity in their home loan.
Borrowers also don’t have the option of choosing the LMI that they want, because it’s already chosen for them by their lender.
Spokesman for consumer group Choice, Tom Godfrey, believes that borrowers should be able to transfer their LMI if they decide to switch lenders, and claimed that the inability to transfer the money is a significant factor when people are considering changing banks.
At present, QBE Insurance and Genworth are the two biggest players in the lenders mortgage insurance industry in Australia. Since 2010, QBE’s LMI premiums have reportedly risen 10%, which a spokesperson attributed to elevated claim levels and a lower investment income.
The Commonwealth Bank is the leading home loan provider in Australia. They’ve reported that approximately 25% of all of their loans require LMI.