The ABC TV News and The Business featured a piece in Lenders Mortgage Insurance (LMI). The segment included data from the DFA household survey, data which can be found in our post Is Lenders Mortgage Insurance a Good Thing? We concluded:
“Overall, whilst LMI may allow some to access the property markets sooner, and protects the banks from risk of loss, borrowers are paying for this insurance, and if borrowing more than 80% they will have no choice as this has become industry practice.
There are systemic risks to LMI, and there is some consumer confusion about the role of LMI. The fact LMI is generally not portable is problematic.
In my view LMI is at least partly responsible for the lofty property prices in Australia, and it lifts the cost of entry into the market and if capitalised increases loan amounts on which interest is paid. It is a barrier to switching. Therefore the role of LMI should be reviewed as part of any wider property or banking inquiry”.
We note that the Financial Systems Inquiry interim report, published Tuesday, did not cover this issue.
