Recent borrowers with large mortgages face greatest negative equity risk

The Reserve Bank of Australia says most households are positioned to cope with higher interest rates and falling property prices, but recent borrowers with large loans face the greatest risk of owing more than their homes are worth. The warning comes amid a property downturn, particularly in Sydney and Melbourne, and wider risks to global financial stability.

Fewer than one in 100 borrowers are currently in negative equity, including some first-home buyers using the government’s 5% home guarantee scheme; the RBA said payment problems among them remain contained. Even a 20% fall in property prices would put about 5% of mortgages into negative equity, while just under 2% of mortgaged households currently lack enough income for essentials and repayments. The RBA also cited potential global market shocks linked to AI investment, conflicts, cyber-attacks and bond-market sell-offs.