St George Bank has reduced its lenders’ mortgage insurance (LMI) fees to just $1 for qualified first-time home buyers, up to a Loan to Value Ratio (LVR) of 85% of their property.

How much of a reduction is this? Let’s use the example of an owner-occupier getting a first home loan with principal interest repayments on a $1,000,000 property with an LVR set at 85%. In this scenario, they would be getting a loan of $850,000, and the normal LMI cost would be around $21,500.

So an LMI charge of $1 is a very significant reduction.

Managing Director of homeloanexperts.com.au said that other banks were unlikely to follow suit amid rising risks due to COVID-19.

He said “Generally the banks are very strict at the moment, they want to take on the lowest risk borrowers while the economy is uncertain. St George is doing this to better capture this market.”

St George currently accounts for 3.37% of the mortgage market as of June, according to AFG, a mortgage aggregator.

This LMI reduction is likely St George’s attempt to capture the first-home buyer market and a bigger slice of market share.

But a 15% deposit is still a big hurdle for first-home buyers, so we can only wait to see if the gambit pays off.