Hi,
What does it mean when the bank self-insure ?
Are they using the mortgage insurers Genworth & PMI to insure deals when LVR is above 80% ?
or
Are they balance sheet lending up to say 95% ? This sound very risky.
Usually they are either balance sheet lending and charge a higher interest rate to compensate for the higher risk.
Sometimes they get their money from the money market at a higher interest rate and this has put them under pressure when the credit squeeze occurred and the cost of the funds increased.
See
http://www.bankrate.com/brm/news/DrDon/20011130a.asp
http://www.clearprogress.com/home/010.030.090
for a second opinion
It is risky but if you charge 100000 people extra interest the extra profit covers the defaults that occur.Thank you for your response.
So banks are more likely to approve a loan where it is out of policy with the mortgage insurers ?
Hi there,
There are currently 3 lenders self insuring – St George Bank, ANZ and RAMS. CBA have dispensation to approve their own insurance however it is Genworth who is allowing them to do this.
None ofthe above lenders charge more in fact St Georgeis cheaper than everyone in the market
Happy borrowing
In addition to Davids list Westpac also self insure some of their loan with Gemworth also insuring the balance.
Anz actually charge a higher premium where the loan is Interest only than they do for a Principal & Interest loan so are more expensive depending on the loan size.
Richard Taylor | Australia's leading private lender
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