RBA Governor Says Almost No Australian Homeowners Are in Negative Equity — What That Really Means

Reserve Bank Governor Michele Bullock delivered a striking assessment to Senate estimates this week, stating that "practically no-one is in negative equity" across Australia's housing market. In a period when many borrowers have been navigating higher interest rates and cost-of-living pressures, that's a significant claim — and one worth unpacking for anyone with skin in the property game.

What Is Negative Equity and Why Does It Matter?

Negative equity occurs when a property's market value falls below the outstanding balance on the mortgage secured against it. For example, if you owe $650,000 on a home now worth $580,000, you are technically in negative equity — sometimes called being "underwater" on your loan.

It matters because it limits your options. You can't sell without bringing cash to the table to cover the shortfall, refinancing becomes extremely difficult, and in a worst-case scenario, a lender could take a loss if they're forced to repossess and sell. At a broader level, widespread negative equity can destabilise the entire housing market, as it did during property downturns in parts of the United States and Ireland in the late 2000s.

Why Is Australia in Such a Different Position?

Australia's housing market has, for the most part, held its value despite the RBA's aggressive rate-hiking cycle that began in 2022. Property prices in major capitals — particularly Melbourne and Sydney — did pull back from their pandemic-era peaks, but they did not collapse. In many cities and suburbs, values have since recovered or pushed to new highs.

The result is that the vast majority of Australian mortgage holders still have substantial equity built up in their homes, either through years of price appreciation, principal repayments, or both. Governor Bullock's comment to Senate estimates reflects that buffer remains largely intact across the national borrower base.

What This Tells Us About Financial Stability

The RBA's view on negative equity is directly tied to its broader financial stability mandate. When homeowners have positive equity, the risk of a cascade of forced sales — and the price falls that come with them — is much lower. Banks are also better protected, because even if a borrower defaults, the underlying asset still covers most or all of the outstanding debt.

For Australian property participants, this assessment suggests the RBA does not see an imminent systemic risk from the mortgage book, even after the most significant rate-tightening cycle in a generation. That is broadly reassuring news for both the banking sector and the housing market at large.

Does This Mean All Borrowers Are Comfortable?

Not necessarily. Negative equity and mortgage stress are two different things. A homeowner can be technically in positive equity — their home is worth more than their loan — while still struggling to meet monthly repayments. Many Australian borrowers, particularly those who bought at peak prices in 2021 or 2022 with smaller deposits, will still be feeling the squeeze from higher repayments even if they are not technically underwater.

Some segments of the market are more exposed than others:

• Recent buyers with low deposits (5–10%) in markets where prices have softened
• Investors with high loan-to-value ratios on properties in slower-growth areas
• Borrowers who fixed their rate during the pandemic and have since rolled onto much higher variable rates

The absence of widespread negative equity is a floor, not a ceiling — it doesn't mean every borrower is thriving.

What This Means for You

If you're a homeowner, the Governor's assessment is a reminder that years of capital growth have given most Australians a meaningful equity cushion. That cushion can be a powerful financial tool — for refinancing, unlocking funds for renovation, or leveraging into a second property.

If you're a buyer, it reinforces that the market is not on the verge of a distressed-sale wave that might dramatically push prices down. Sellers, on the whole, have the equity to hold or negotiate — not the desperation to offload at any price.

And if you're an investor watching the broader financial stability picture, Bullock's remarks suggest the RBA is not overly alarmed about the state of Australian household balance sheets — which historically has been a precondition for meaningful monetary policy easing. Keep watching the data.