Scenario analysis based on loanlevel data suggests that a decline in housing prices of 10 per cent would raise the share of balances in negative equity to 0.4 per cent, which is still much lower than its peak of 3¼ per cent in 2019.
Even a fall of 20 per cent in housing prices would only increase the share of balances in negative equity to 2.5 per cent. This low incidence of negative equity reduces the likelihood that borrowers will enter into default, as well as the size of losses incurred by lenders if they did.