Key facts
- First home buyer loan applications saw a 10% increase in the first half of August compared to June.
- Property investor loan applications have decreased, while demand from first-time buyers remains strong.
- The Australian government's 5% deposit scheme allows first-time buyers to borrow up to 95% of a property's value with a government guarantee.
- This scheme has helped participants save over $2.5 billion in lenders' mortgage insurance.
- Demand is focused on properties priced below specific caps, varying by state and territory.
First-time homebuyers in Australia are increasingly seeking home loans, even as property investors pull back from the market, according to new data from mortgage broker Loan Market. Despite a general slowdown in home buying following interest rate hikes and changes to negative gearing policies, first-time buyer applications saw a notable increase in early August.
Data from the Australian Bureau of Statistics (ABS) indicates that while investor loans fell by 8.6%, first-time buyer mortgages saw a smaller decrease of 2.9% in July. This trend is particularly strong in New South Wales and the Australian Capital Territory, where first-time purchases are higher year-on-year, and in South Australia and Tasmania, reaching their highest levels since 2021.
Peter Esho, CEO of property finance firm 13x, noted a shift in market sentiment, with first-time buyers feeling more optimistic and investors facing headwinds. He attributes the current demand to pent-up demand from buyers who have been waiting on the sidelines, driven by government policies. Demand is particularly focused on properties priced near the eligibility caps for the government's 5% deposit scheme.
This scheme allows eligible first-time buyers to borrow up to 95% of a property's value, with the government guaranteeing the loan and waiving costly lenders' mortgage insurance (LMI). Housing Australia, the scheme's administrator, reported that participants have collectively saved over $2.5 billion in LMI. The scheme has facilitated over 320,000 homeownerships since its inception in 2020, with over 5,000 new guarantees issued monthly since February.
Properties eligible for the guarantee have experienced slower price declines compared to homes outside the scheme. Housing Minister Clare O’Neil stated that the scheme is crucial for young people to enter the housing market. Helia, a major LMI provider, estimated that the scheme's expansion cost it nearly $9 million in lost business in the first half of 2026. ANZ, one of the major banks offering the scheme, maintained a steady value of mortgage applications in the June quarter, with scheme participants now representing 5% of its new loan applications.