St George in $1 mortgage insurance offer to first-home buyers

It can cost thousands, but St George will charge first-home buyers with a 15pc deposit just $1 for lenders’ mortgage insurance.

St George’s move could save first-home buyers thousands of dollars. Picture: Jono Searle

St George has cut its lenders’ mortgage insurance charge to just $1 for first-home buyers with a deposit of 15 per cent, a move the bank says will help some get a foot in the property door sooner.

Lenders’ mortgage insurance is sold to borrowers who have not saved a big enough deposit, usually of at least 20 per cent, to protect the lender from suffering a loss if the borrower defaults.

Buying a home with a property value of $650,000 with a deposit of less than 20 per cent could mean a one-off lenders’ mortgage insurance (LMI) payment of more than $6000.

But from Monday, changes to the St George first-home buyer home loan offer will mean that eligible customers can put forward a deposit of 15 per cent of the value of the property and pay just $1 in LMI.

“It could help a lot of first-home buyers avoid costly mortgage insurance, and that’s probably a good thing,” RateCity research director Sally Tindall told The Australian.

“Although, we always say the bigger the deposit, the better the buffer you’ll have and the lower your monthly repayments will be so it’s really important to not just jump at a particular deal.”

According to mortgage comparison site RateCity, Westpac-owned St George is currently the only bank to offer first home buyers with a deposit of less than 20 per cent a better deal on LMI. However Commonwealth Bank and NAB are both offering loans under the federal government’s first-home loan deposit scheme, which provides loan guarantees for buyers with a deposit of 5 per cent.

Citing its own research, St George said the COVID-19 pandemic meant many Australians wanted to save faster for their own home, and three quarters of people would now prefer to live in a house over an apartment.

“Australians have spent more time at home than ever before during the COVID-19 restrictions, and we are seeing a bigger trend in how the nation is re-evaluating their current living situation,” St George general manager Ross Miller said.

St George said 64 per cent of first-home buyers expect to face financial problems leading up to their first property purchase and nearly three in 10 first-home buyers are struggling to find a property that suits their needs.

“Our research shows one of the biggest hurdles for first-home buyers to overcome is the time it takes to save for a deposit, despite being in the financial position to make home loan repayments,” Mr Miller said.

“We are seeing many pain points experienced along that savings journey, including giving up holidays, reducing entertainment expenses, having to move back home with parents, moving in with friends or even leaning on family members to help top-up savings.

“By reducing the expense of lenders’ mortgage insurance, first-time purchasers may be able to afford a property that meets their needs sooner and save thousands of dollars.”