The Reserve Bank of Australia estimates that fewer than one in 100 borrowers currently owe more on their homes than the properties are worth, despite falling property prices in Sydney and Melbourne.
The RBA said recent first-home buyers with large loans face the highest risk of entering negative equity, according to analysis released by the central bank. The bank's assessment suggests Australian households remain well-positioned to absorb simultaneous pressures from rising interest rates and declining property values.
Property prices have fallen most sharply in Sydney and Melbourne. The RBA's data indicates the negative equity problem remains contained, with less than 1 per cent of borrowers underwater on their mortgages.
The warning about first-home buyers reflects a specific vulnerability. Borrowers who entered the market recently at higher loan amounts relative to property values have less equity cushion. If property prices continue to decline, these newer borrowers could move into negative equity faster than those who purchased earlier or with larger down payments.
The RBA's broader assessment offers some reassurance about household resilience. The central bank's modelling suggests most borrowers can absorb the combined shock of rate increases and price falls without tipping into negative equity. However, the identification of recent large borrowers as a risk group signals that vulnerable cohorts exist within the broader picture of overall stability.