Source : Perth Now news
First homebuyers on the Albanese government’s 5 per cent deposit scheme are most likely to owe more than their home is worth.
But the Reserve Bank also says fewer households will have negative cashflow in the coming years than during the peak of the cost-of-living crunch in 2024.
The RBA’s six-monthly health check on the financial system, released on Thursday, says Australians who brought a house using the federal 5 per cent deposit scheme are more likely to be in negative equity than other mortgage holders.
“However, the potential risks to financial stability from these borrowers are mitigated by the structure of the scheme and the typical low-risk characteristics of most first home buyers,” the report says.
“ … data suggest that even in a scenario involving a large uniform fall in housing prices of 20 per cent from current levels, only around 5 per cent of mortgages would fall into negative equity.”
The biannual report from the central bank comes two days after the bank hiked the cash rate to its highest point since November 2011.
The fourth interest rate hike this year comes as home prices fall across the country, on the back of cuts to property investor tax concessions.
The latest figures show residential real estate values fell 1.1 per cent across the country in September. In the capital cities, values have fallen 6.4 per cent since March.
The RBA report forecasts even if all property prices in the country dropped 20 per cent, about 5 per cent of mortgages would slip into negative equity. Currently less than 1 per cent are in negative equity.
“If a borrower becomes unable to service their loan and had to make the difficult and disruptive decision to sell their home, the vast majority would have enough equity torepay their loans in full,” the report says.
Despite interest rates hitting a 15-year high, the central bank report also predicts variable-rate, owner-occupiers falling into a cash shortfall will remain just under 2 per cent, and “well below” the peak in 2024.
“This is because some of the households estimated to have been in cash flow deficit in 2023-2024 are expected to have experienced significant income growth since then.”
On top of that, people getting a mortgage in the past couple of years have had to show they can pay higher loan servicing buffers, compared to mortgages written during the pandemic when money was much cheaper.
The Morrison government introduced the 5 per cent deposit scheme in 2020, but the current government removed income thresholds in 2025.
About half of first homebuyers have used the scheme since the income caps came off.
