RBA Warns First Home Buyers Face Negative Equity Risk

The Reserve Bank of Australia (RBA) has warned that first home buyers who used the Albanese government's 5% deposit scheme are more likely to fall into negative equity as property prices head towards their biggest correction in four decades.

This warning comes after the RBA released its six-monthly health check of the Australian financial system, which found that households overall had enough savings and cash-flow buffers to manage rising interest rates and high inflation.

However, financial distress is building among low-income borrowers, according to the RBA. The bank noted that property prices are being driven by four interest rate rises this year, making it increasingly difficult for first home buyers to afford their mortgages.