Insurers haven’t been consulted by the Coalition government on its $500 million first-home deposit plan, which Prime Minister Scott Morrison says would eliminate the need for lenders’ mortgage insurance (LMI).

The First Home Loan Deposit Scheme announced by Mr Morrison yesterday targets buyers who cannot afford the 20% down-payment most banks require for finance.

Buyers who meet the scheme’s criteria will need only a 5% deposit and will “save around $10,000 by not having to pay for lenders’ mortgage insurance”, he said at the Liberal Party’s campaign launch in Melbourne.

The Labor Party has pledged to introduce a similar policy if it wins.

The scheme is being widely seen by commentators as a late inclusion in the Coalition’s re-election campaign, which has been hampered by criticisms that it has no new policies.

Insurers appear to have been caught offguard, and caution the move may affect the LMI sector and the industry at large.

Insurance Council of Australia spokesman Campbell Fuller told insuranceNEWS.com.au today that the “council and its members have not been consulted on the implications this policy might have on the LMI market and the wider insurance industry”.

“We look forward to seeing more details of the Morrison Government’s… policy, and being properly consulted on its implementation.

“LMI plays an important role in the housing market and in the economy. It enables banks to have greater confidence in lending money to a home-buyer if the buyer meets the lending requirements but has a deposit smaller than the bank requires (typically a minimum of 20% of the purchase price).”

Genworth Mortgage Insurance Australia “is in discussions with both parties” over their proposals, CEO and MD Georgette Nicholas told insuranceNEWS.com.au.

“We have more than 50 years of insights and experience in Australian [high loan-to-valuation ratio] residential mortgage lending, which will be valuable in implementing the First Home Loan Deposit Scheme.

“We welcome the opportunity to work with the government of the day to develop and implement policies that facilitate home ownership.”

QBE, the other major LMI provider, told insuranceNEWS.com.au it has no comment on the proposal.