RBA Warns of Negative Equity Risk for First-Home Buyers on Low-Deposit Scheme

The Reserve Bank of Australia's (RBA) latest Financial Stability Review has highlighted a concerning trend for first-home buyers who entered the property market through the Albanese government's 5 percent deposit scheme. These borrowers are now more likely to be in negative equity than any other group, according to the RBA.

The review found that approximately 102,000 first-time buyers have used the low-deposit initiative since its introduction. The RBA noted that this cohort is exposed to falling property values due to their minimal equity cushion. Housing market conditions have softened in many regions as borrowing costs climb, amplifying the risk for recent entrants who financed purchases with small down payments.

Prime Minister Anthony Albanese pushed back on the suggestion that the scheme has left participants vulnerable, stating that the number of Australians currently in negative equity is lower than under the previous government. However, the RBA's assessment underscores the trade-off embedded in low-deposit lending policies: they widen access to homeownership but leave borrowers with little buffer if prices decline.

The review did not call for the scheme to be scrapped, but its findings are likely to sharpen debate over the program's design as affordability pressures persist. The RBA noted that household resilience overall remains intact, though the distribution of stress is uneven.