RBA Says Most Aussie Mortgage Holders Will Keep Equity Even With 20% House Price Fall

The Reserve Bank of Australia (RBA) has released its Financial Stability Review, highlighting that most mortgage holders in Australia can handle a further decline in house prices. According to the review, even if house prices fall by another 20%, only about 5% of mortgages would be in negative equity.

The RBA noted that current lending standards are sound, and banks are highly capitalised and profitable, which puts them in a strong position to weather a material deterioration in the housing market. However, the central bank warns that risks to financial stability are coming from abroad, including AI-driven markets, leverage, and cyber threats.

The review points out that fewer than 1% of borrowers are currently in negative equity, while about 2% of owner-occupiers face a cash flow shortfall, but most of those holding savings that would cover at least six months of expenses. In the 20% price-fall scenario, the bank estimated that only about 5% of mortgages would be in negative equity.