Let's say I sell you a brand new car, and require you to buy insurance on the car. How should we decide on the price of the insurance? Based on the value of the car? Or just pluck a number out of the air that YOU think is "reasonable"? The downpayment requirement is a way to filter risk, if you cannot afford to put 20% down, then by definition you are a MUCH higher risk for defaulting on your loan.
Perhaps you are buying too much house.
"Most" people make $40-50,000 a year (that's the overall average), and could save 25% of it if they tried. So in four years they would have a $40,000 CASH deposit. Having a cash deposit would give them a better rate, and avoid the PMI.
But then "most" people, when they decide they want something, want it NOW! Now, now, now!
That's why most people are up to their eyeballs in debt!