The Reserve Bank’s October 2026 Financial Stability Review confirms the downturn in the housing market is leading to negative equity for first home buyers lured into a falling property market by the government’s 5% Deposit Scheme.
In its latest FSR out today, the RBA warned that recent buyers and high-LVR borrowers “are more likely to be in negative equity. This includes first home buyers participating in the Australian Government 5% Deposit Scheme.”
These, often younger cohorts, who took up 95% mortgages thanks to Labor are now likely to be in trouble given the downturn in house prices across Australia, and in areas like the Sydney and Melbourne suburbs.
The RBA’s modelling further shows a 20% fall in house prices would mean that “around 5% of mortgages would fall into negative equity.” This is not beyond reasonable doubt given major banks are already warning of a large house price falls of some 15%.
The RBA’s warnings are already being borne out in APRA LVR data – with APRA’s latest September 2026 quarter Quarterly property exposures statistics showing that the value of loans with a 95% or greater LVR has blown out to $15.6 billion since Labor recklessly expanded the 5% Deposit Scheme in October 2025. This is a 62.6% increase on the previous 9-month period (see Figure below). It is a record for any 9-month period since APRA’s dataset which starts in March 2019.
Labor has smashed the housing market from both ends, with economic mismanagement driving up interest rates and its toxic new housing taxes threatening investment and supply.
The RBA noted real disposable income per person fell in the first half of 2026, “mostly driven by higher inflation and increases in interest rates”.
Quotes attributable to the Shadow Treasurer:
“The Albanese economic model is now catching up with them, while Anthony Albanese and Jim Chalmers are drowning in their own inflation, they’re pulling the wages of Australians and profitability of small businesses with them.”
“To cover for their failing economy, the Albanese government lured aspirational first home buyers at the greatest time of risk, and now they’re paying higher interest on empty debt.”
“The Albanese government’s addiction to spending is stoking inflation, increasing interest rates, collapsing home values and sending families backwards.”
Quotes attributable to the Shadow Minister for Housing and Homelessness:
“Labor turned a targeted scheme into an uncapped free-for-all, pumping up entry-level prices and saddling young Australians with 95% mortgages.”
“As we discovered under Freedom of Information requests, Labor ignored warnings from the RBA about the 5% Deposit Scheme. So, they are likely to do the same with this RBA report.”
“Instead of building more houses, Labor is saddling often young Australian home buyers with more debt and higher housing taxes. This is an entirely preventable disaster of Labor’s making.”
