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LMI Provider

August 2017

The average interest only investment loans with a variable rate have shot up by 73 basis points due to rate movements beginning last November.

These figures, from the latest Reserve Bank of Australia (RBA) Statement on Monetary Policy reveal this increase was caused by a double whammy of rate rises in November and again in June.

“Since May, most lenders have increased their standard variable reference rates for interest-only loans by around 30 basis points and reduced standard variable rates for principal-and-interest loans to owner-occupiers by around five basis points,” the RBA wrote.

Figures from the latest RBA Statement on Monetary Policy

The net effect of these changes alone has increased the outstanding variable rate by around five basis points since May, with a rise of 13 basis points since November.

At the same time Australia’s largest provider of lenders’ mortgage insurance (LMI) Genworth has reported an annual drop in net profit after tax (NPAT) of 34.7%, signalling further financial difficulties amidst economic and regulatory change.

In its first half 2017 earnings, the company reported a NPAT of $88.7m, down from the $135.8m reported in the same time period last year.

New business volume for Genworth decreased by 6.4%, moving from $14bn in the first half of 2016 to $13.1bn in the first half of this year. This included $2.1bn in bulk portfolio transactions.

The number of portfolio delinquencies reported by Genworth has actually risen from 6,413 to 7,285 (a change of 872) between 1H16 and 1H17, indicating higher levels of mortgage stress.

Looking at a state-by-state breakdown, Queensland and Western Australia experienced the highest delinquency levels in the country as displayed in the table above.