The Reserve Bank of Australia (RBA) has found “the vast majority of borrowers would remain able to service their debt under a range of plausible economic scenarios”, according to the central bank’s latest Financial Stability Review.
Crucially, about 97% of borrowers have positive cash flow, which means they’re able to meet their mortgage commitments and potentially get ahead on their mortgage.
Furthermore, less than 1% of borrowers are currently in negative equity (i.e. their property is worth less than their outstanding mortgage), which is “a meaningful improvement” from before the pandemic.
“Large liquidity and equity buffers would enable most households to navigate a period of higher-than-expected inflation and interest rates or a significant deterioration in the labour market,” the RBA said.
“Even when faced with a severe 30% decline in housing prices, around 9 in 10 mortgagors would still have positive equity. These borrowers could sell their home – albeit a disruptive and last resort solution – for at least the outstanding balance of their loan if faced with severe stress.”
Everyone has a unique scenario, which is why it’s important to talk to an expert about your specific situation. If you’re struggling to meet your repayments, your mortgage broker and lender can help.
