A bit more than 40 per cent of IO borrowers have no buffers of this sort at all, compared to around 20 per cent of principal and interest borrowers. [2] Some of this difference arises because IO loans tend to be newer, and so have had less time to accumulate buffers.
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).