IO loans are also more likely to be taken out by investors, who may have other liquid assets. But even controlling for these factors, a significant difference exists. That said, those IO borrowers who have buffers, generally have much larger buffers. Nationally, around 15 per cent of loans that are in arrears are also in negative equity (Graph 3).
However, this is equivalent to just 0.1 per cent of all housing loans and the risks that mortgage arrears currently pose to bank profitability are low. Graph 3  Tighter lending standards should lead to lower arrears but this can be hard to discern in the raw data.