Negative Equity Looms for Recent First-Homebuyers

Recent first-homebuyers who participated in the Federal Government's 5 per cent deposit scheme are most likely to fall into negative equity, according to Reserve Bank of Australia research.

The RBA has modelled a scenario where property prices plummet by 20 per cent across the country and the cash rate increases to 5.6 per cent, the highest level since 2008.

In this scenario, around 5 per cent of borrowers would fall into negative equity, while about two-thirds of those at risk have enough savings buffers to cover at least six months of mortgage payments and essential expenses.

The RBA also estimated that a cash rate hike to 5.6 per cent would impose another $495 on monthly repayments for an average new mortgage of $731,000, adding up to $5940 over a year.