ABS lending data for July shows the number of new loan commitments for first home buyers was 8,338 - falling below the decade average of 8,787.

The number of first home buyers in the market hit its record peak in January last year, before dropping by 48% over the following months. 

Below are the top three reasons as to why first home buyers' appetite has waned over the past year or so.

Why are first home buyers exiting the market?

1. Rising interest rates

One of the main contributors is rising interest rates, ultimately reducing the amount of money first home buyers can borrow.

The jump in the cash rate is less likely to affect subsequent buyers, as they can partly fund a home purchase by selling their existing home, meaning they won't need to borrow larger sums from the bank.

ANZ economists said a peak cash rate of 3.35% would reduce borrowing power by up to 30%.

Analysis by CoreLogic found that the value of new loans to first home buyers dropped 15.8% between April and July 2022.

This is compared to a drop of just 5.8% in lending to subsequent buyers, including upgrades, downsizers and other movers.

First home buyers with significant savings or higher incomes might be able to take advantage of the now falling house prices. However, most buyers will probably find that the fall has not yet offset the rise in mortgage costs. 

Moody's research shows with a cash rate of 2.35%, home prices would need to decline 18.3% for there to be no difference in mortgage payments.

2. Fewer government schemes available

The property market became more accessible through government subsidies like the HomeBuilder grant.

Australians were eligible for the $25,000 HomeBuilder grant if they were building a new home, buying a new home or substantially renovating an existing home. 

Zippy Financial Director and Principal Broker Louisa Sanghera said first home buyer activity had now returned to a level lower than what was recorded pre-pandemic.

"Back then, first homebuyers had been increasing slowly after many years on the sidelines because of the high property prices at the time – or so they seemed in retrospect," Ms Sanghera said.

"However, the government’s popular HomeBuilder scheme changed that scenario, with a significant proportion of the 113,000 applications likely to have been first-time buyers, keen to make the most of the financial grants that were available."

However, this scheme was removed on 31 March 2022; other grants such as the First Home Loan Deposit Scheme are limited in spots available annually.

3. Price growth hits regional areas

Even regional areas haven't escaped the wrath of rising house prices. Buying or building regionally was once seen as one of the easier ways to tap into the property market, but is now proving to be just as difficult as in the bigger cities. 

As companies adopted a more permanent working from home arrangement for their employees, many saw this as an opportunity to leave the expensive capital cities and relocate to an area with more space. As a result, there has been a rise in the price of properties in regional zones. 

CoreLogic's annual figures show regional dwelling values jumped 17.0%, outpacing the combined capitals, which saw dwelling values rise 5.4% over the same period. 

But not all hope is lost for first home buyers

Ms Sanghera said the rising interest rate cycle appeared to be slowing, with rates still considered relatively affordable by historical standards.

"First home buyers really need to be out there purchasing over the next six months, because this market lull is not likely to last forever," she said. 

"My advice for prospective property owners is to strictly keep to their budgets, as well as calculate their potential future mortgage repayments by adding about one percentage point to the home loan rate on offer.

"That way they will be well-placed to manage interest rates increases over the next year, which are expected to be quite moderate."

For those struggling to tap into the property market, here are some of Zippy's simple strategies to take on board:

  • Save, save, save: Prove to your lender that you have the ability to save consistently. Many lenders have a mandatory savings policy and will want to see that can demonstrate a consistent pattern of saving.
  • Reduce your debt: It will not reflect well on a potential buyer's ability to manage a debt portfolio if their periodic debt payments are not being met. Lenders will be skeptical about whether the home loan repayments will be met. 
  • A budget is your best friend: Create a budget and calculate whether you will be able to afford home loan repayments and to what extent if interest rates rise. They will likely be higher than rental payments so it's important to know your limit. 


Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Update resultsUpdate
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
6.04% p.a.
6.06% p.a.
Principal & Interest
Featured Online ExclusiveUp To $4K Cashback
  • Immediate cashback upon settlement
  • $2,000 for loans up to $700,000
  • $4,000 for loans over $700,000
5.99% p.a.
5.90% p.a.
Principal & Interest
Featured Apply In Minutes
  • No application or ongoing fees. Annual rate discount
  • Unlimited redraws & additional repayments. LVR <80%
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
6.14% p.a.
6.16% p.a.
Principal & Interest
Featured Unlimited Redraws
  • No annual fees - None!
  • Get fast pre-approval
  • Unlimited additional repayments free of charge
  • Redraw freely - Access your additional payments when you need them
  • Home loan specialists available today
Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of . View disclaimer.

Image by Andrea Piacquadio via Pexels.

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