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Genworth will raise its prices in the coming weeks due to the ongoing risks posed by rising unemployment.
The mortgage insurer will raise its prices by an average of 20 per cent this quarter after a 17 per cent rise in 2008.
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Genworth’s chief executive Martin Barter told Mortgage Business the rise would come as no shock to the company’s customers who had been warned of the impending price hike several months earlier.
“We have worked with our customers to make sure they are adequately prepared for any rise in price and we have given them ample warning so that they may make any system changes,” Mr Barter said.
According to Mr Barter, unemployment was the most significant risk to the mortgage insurance market, citing a recent survey that showed one in five home owners are concerned about keeping their job.
“There is economic uncertainty and unemployment is expected to rise and with that one expects to see some increases in people not being able to pay their mortgage – that’s the spectre on the horizon,” he said.
Mr Barter also said the proposed increase was reasonable and that mortgage insurance represented a ‘very small piece of the pie in terms of what people pay for a mortgage.’
Australian First Mortgage director of credit services David White told Mortgage Business the increase would only have a minor impact on borrowers.
“The price rise will only affect products in excess of 80 per cent LVR as Genworth has made no changes to its premiums under 80 per cent,” Mr White said.
“While the price rise will mean extra costs for borrowers, it will not have an astronomical impact on lenders. Moreover, there is still another mortgage insurer on the market that lenders and borrowers can opt to go with.”
According to Mr White, mortgage insurer QBE LMI has not raised its mortgage insurance prices to date, however, he said they have not ruled out a price increase in the future.
