The Australian government’s Home Guarantee Scheme is undercutting the lenders mortgage insurance market to the tune of around A$250 million a year, LMI sector leader Helia says. Helia released its results for the 12 months to December yesterday, reporting a significant drop in gross written premium and lower revenue. GWP in 2023 was $185.2 million – down from $319.9 million in 2022 and $549.6 million in 2021. That is a 66 per cent fall over two years. Helia chief executive Pauline Blight-Johnston said the drop in GWP was mostly volume related. Apart from the impact of the Home Guarantee Scheme, low levels of new home lending and even lower levels of lending at high loan-to-valuation ratios were the main factors. An additional factor was lenders waiving LMI requirements as part of their competitive strategy. The Home Guarantee Scheme includes the First Home Guarantee, the Family Home Guarantee, the Regional First Home Buyer Guarantee and the New Home Guarantee. Under the scheme the government provides a guarantee for loans with deposits of as little as 2 per cent. One of the conditions for participating lenders is that they must not require LMI with the loan. The number of guarantees grew from 32,500 in 2021/22 to 41,700 in 2022/23. It will be bigger in the current financial year, after being expanded last July. According to Helia’s data, the proportion of new loans with LVRs of 80 per cent or more (when LMI usually applies) fell from 35 per cent in 2022 to 29 per cent in 2023. Weak GWP flowed through to Helia’s insurance revenue line, which fell from $467.7 million in 2022 to $427.2 million last year. Thanks to a positive return from its investment portfolio, profit grew from $201.2 million to $275.1 million. There was little change to the credit quality of the insured loans. New delinquencies rose 2 per cent over the year but total delinquencies were unchanged. Incurred claims rose from $60.6 million in 2022 to $64.6 million last year. The number of claims paid fell from 360 to 240, while the average claim paid rose from $64,000 to $75,900.