Mortgage delinquency rates are the lowest they have been since the global financial crisis, according to a major mortgage insurer, reinforcing the strength of the mortgage sector in a shaky economic environment.
LMI provider Genworth reported a 26.5% increase in its net profit after tax for the year to December 2014, largely off the back of the strength in the mortgage market.
According to the insurers full year results, closing delinquencies were down 0.1% to 4,953 in December, representing the lowest delinquency ratio since 2007 at 0.33%.
Genworth CEO Ellie Comerford said the overall business was supported by the favourable loss experience in the portfolio throughout the year.
“During the second half, the loss ratio of 18.4% … continued to reflect a strong housing market which resulted in lower levels of delinquent loans, fewer delinquent loans converting to claim, and an overall lower average claim amount. For the full year, the loss ratio of 19% is down from 32.1% in 2013.”
According to the latest quarterly APRA statistics, there is an ongoing trend towards a lower average LVR mix. In the quarter to September 2014, loans approved at an LVR of greater than 90% dropped 2% from the same quarter the year before, making up 12% of new housing loans approved. Meanwhile, loans approved at an LVR between 60% and 90% increased by 2%, making up 63% of new residential loans approved.
Comerford says this is a reflection of the strength of the mortgage market in the low interest rate environment, despite the facts rates have been dropped due to an unsteady economy.
“In 2014, we have continued to work with our lender customers and other key stakeholders to reinforce the benefits that a strong, stable mortgage insurance business such as ours can provide to the mortgage market and the financial system more broadly.
“Looking ahead to 2015, there is room for caution in respect of the Australian macroeconomic environment and in particular the uncertain economic outlook. Whilst interest rates have now been lowered to add some further support to the economy, we continue to focus on our role in ensuring sound lending practices across the mortgage industry.”
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