Government intervention has led to long-tail decline in important product for high-risk borrowers
Sydney-based insurance multinational QBE enjoyed a rare spark of growth in its long-declining Lenders Mortgage Insurance (LMI) segment in the first half of 2025.
Per financial statements published this Friday, gross written premiums in its LMI segment came for US$50 million ($77 million) for the six months ending 30 June.
This represented a 37% increase from the prior period, reflecting a modest recovery after a sustained period of decline.
QBE attributed this improvement to increased housing market activity and lower interest rate expectations.
But while offering a ray of light, long-tail trends show that all is not rosy inside QBE’s LMI department.
What is LMI and why is it important for brokers?
Lenders Mortgage Insurance (LMI) enables borrowers to secure a home loan with a smaller deposit, but it comes at a cost.
It is the lender that holds the LMI to safeguard itself against the risk of onboarding a riskier borrower. But the lender then passes this cost down to the borrower.
For a property valued at $1 million, LMI can add anywhere from $10,000 to $50,000 to the total cost, depending on the loan amount and loan-to-value ratio (LVR).
Read more: Here's how Labor's Home Guarantee Scheme changes LMI for good
It is important for brokers to enlighten their clients on the significant additional charges that LMI can incur.
However, under the Labor Government’s Home Guarantee Scheme, eligible borrowers can avoid paying LMI altogether. In this scheme, the government acts as guarantor for high-LVR loans, removing the need for lenders to take on LMI.
This has caused major market-distorting effects, not to mention given LMI providers like QBE something to worry about.
LMI revenue on the decline
Back in 2023, QBE’s LMI gross written premium declined 51% to US$49 million in the first half, “driven by reduced housing market activity and new government initiatives for first-home buyers”.
In the 2024 first half, LMI gross written premium declined further by 21% to US$38 million, once again “reflecting a market slowdown driven by higher interest rates and inflationary pressure, alongside the impact from government initiatives to support first-home buyers”.
While today’s result signalled a recovery, gross written premiums in QBE’s LMI segment remain substantially below pre-Covid levels. For the 2019 half year, QBE’s LMI gross written premiums came to US$83 million.
As a multi-faceted insurance provider, LMI represents only a small fraction of QBE’s earnings. But for LMI specialists like ASX-listed Helia, the consequences of government intervention are a lot more severe.
Questions have been raised over the long-term viability of the LMI market, and what it could mean for high-risk borrowers without access to government incentives.
