In a shocking twist that will surprise absolutely no one who has been paying attention, first home buyers are still snapping up loans - with a little help from the government - even as investors beat a hasty retreat from Australia's property market.
New data from mortgage broker Loan Market shows that first-timers are now the only cohort applying for more loans than they were in June. Home buying had slowed after interest rates rose three times and Labor abolished negative gearing for most investment purchases. Prime Minister Anthony Albanese, ever the optimist, said the reform was meant to 'level the playing field' for first home buyers. And lo, it appears to be working, which is probably why the PM is grinning like a Cheshire cat.
Loan Market reported first-timer applications dropped 3% in July, then surged 10% into the first half of August on a weekly average basis. Meanwhile, applications from other owner-occupiers and investors were roughly steady in August compared to June. The Australian Bureau of Statistics confirms that home loan demand had been falling across the board by June, down 5.4% compared to the prior quarter. But here's the kicker: while investor loans fell by 8.6%, first-time buyer mortgages only dipped 2.9% on a seasonally adjusted basis. Take that, speculators!
First home purchases were still higher in New South Wales and the Australian Capital Territory than the same time last year, and they hit their highest level since 2021 in South Australia and Tasmania. Peter Esho, chief executive of property finance firm 13x, noted that new entrants have become more visible in recent months. 'First home buyers, I think, now feel like the sentiment has swung in their favour, and investors feel like the sentiment swung against them,' Esho said. 'There's been a lot of buyers on the sideline for a long time … so that pent-up demand is going to keep it for the next few years and policy is obviously a big driver.'
Demand is concentrating on properties priced near the eligibility caps of the government's 5% deposit scheme, which allows first-timers to borrow up to 95% of a property's value with a government guarantee, waiving costly lenders' mortgage insurance (LMI). Prices have fallen across Australia, but homes eligible for the guarantee have seen slower price falls than those outside the scheme, according to data company Cotality. Eligibility caps vary by region: $1.5m in NSW cities, $1m for south-east Queensland, $950,000 for Melbourne and Geelong, $850,000 for Perth, $900,000 for Adelaide, and $700,000 for Hobart. Labor expanded the scheme and scrapped income caps in October 2025.
Housing Australia, which administers the scheme, found applicants typically saved more than $15,000 in LMI for the median deposit on the median home purchased under the scheme. Since its inception in 2020, more than 320,000 people have become homeowners through it. Housing Minister Clare O'Neil told Guardian Australia that participants had collectively saved more than $2.5bn in LMI by the end of July. 'We know that for too long the housing market has been stacked against young people and without this scheme many wouldn't be able to enter the market at all,' O'Neil said, presumably while doing a little victory dance.
Since February, more than 5,000 new guarantees have been issued each month, slipping just below 5,000 in July - still more than any month before the expansion. Australia's leading LMI company, Helia, estimates the scheme's expansion cost it nearly $9m worth of first home buyer business in the first half of 2026. Its remaining customers are typically those buying above price caps or from non-participating banks, a spokesperson said, trying to sound cheerful.
ANZ, which began offering the 5% scheme in March, was the only big four bank to maintain a steady value of mortgage applications in the June quarter. The influx of first home buyers offset a drop in lending to other groups. Scheme participants now account for one in every 20 new loan applications at ANZ. So, the playing field is being leveled, one 5% deposit at a time. Investors, meanwhile, can console themselves with their portfolios and perhaps a nice cup of tea.