"Negative equity" a risk if housing correction deepens, Reserve Bank warns

More major falls in real estate values particularly in Sydney and Melbourne could push some borrowers into "negative equity", the Reserve Bank has warned. 

In its six-monthly Financial Stability Review released this morning, the RBA says the deepening housing correction has the potential to stoke negative equity - where the outstanding balance of a loan taken out to purchase real estate exceeds the value of a property it is secured against. 

ABC's Peter Ryan says the RBA's warning will send jitters among borrowers who bought at the top of the market.