Lenders mortgage insurance does not offer the borrower any protection from defaulting on their loans.  It is simply to insure the bank against the borrower defaulting.  In most cases lenders mortgage insurance is paid for by the borrower when borrowing more than 80% of a properties value.

the higher the percentage of a properties value you need to borrow the greater the lenders mortgage insurance premium.  Someone borrowing 83% of a properties value may only pay 0.6% of their loan amount in lenders mortgage insurance (LMI) while someone borrowing 100% (a no deposit loan) will probably pay around 2% - 3% of their loan amount in lenders mortgage insurance.

So if you don't have a deposit and want to borrow 100% of the value of a property between the lenders mortgage insurance, stamp duty and application costs you still have a few thousand dollars in fees.

St George have changed this by offering a no deposit no lenders mortgage insurance loan called Quick Start.  With a quick start loan instead of paying a lenders mortgage insurance premium which may be 3% of your loan amount you elect to have an interest rate which is 1% above St Georges standard rates on no deposit loans.  St George's variable rate for a no deposit loan is currently 7.39%.  On a quick start loan your interest rate would be 8.39%.

Yes the interest rate and loan repayments are slightly higher than if you paid the lenders mortgage insurance premium.  On a loan amount of $300,000 your minimum monthly repayments at 7.39% are $2,075.  On a quick start loan they would be $208 per month higher at $2,283.  But a quick start loan allows someone with no savings at all that is eligible for the first home owners grant to get into the property market with a very decent home loan product.