Mortgage stress rising in regional areas: Genworth
The Australian 12:00am November 5, 2016
Michael Bennet
Genworth Mortgage Insurance Australia yesterday did little to boost sagging sentiment on the housing market, flagging higher losses and ongoing delinquencies in regional areas suffering from the collapse in mining activity.
In line with higher troubled loans reported by banks, Genworth said mining-exposed regional areas were facing “higher levels of mortgage stress” from rising underemployment and that it expected “elevated” delinquencies.
The nation’s biggest insurer of banks’ mortgages raised its expected loss ratio — claims and forecast future problems — for the year to December 31 to about 35 per cent, compared with the prior forecast of between 25 and 35 per cent. The loss ratio jumped to 45 per cent for the quarter, up from 33 per cent in the first half.
Genworth shares dived 7.6 per cent to $2.79.
Chief executive Georgette Nicholas said the poor trend continued in the three months to September 30, with banks writing fewer mortgages at high loan-to-value ratios to curb risks and adhere to regulatory supervision.
“Queensland and Western Australia continue to have elevated delinquency development from economic pressure, in particular in mining-related regions,” she said.
Genworth and rival QBE Lenders Mortgage Insurance typically insure — at a cost to consumers — banks’ riskier loans where LVRs exceed 80 per cent, leaving them exposed to problems earlier in the cycle.
Despite falling unemployment rates across all states except WA, Genworth said delinquency rates had increased across all states, including NSW where economic growth has been strongest.
The group’s overall delinquency rate rose eight basis points to 0.47 per cent.
Gross written premium fell 26 per cent to $92.5 million in the quarter, which CLSA analysts said reflected lower high-LVR originations and the full impact of the loss of its contract with Westpac.
A more positive development this week was the renewal of its contract with Commonwealth Bank for three years, which represents about 43 per cent of GWP.
“Lower levels of new business written is conducive to higher capital releases ahead,” CLSA’s Jan van der Schalk said of the quarter, noting the forecast dividend payout ratio had been maintained at 50-80 per cent.