First home buyers are facing the same market correction as more experienced property purchasers. Federal Budget investment changes have impacted their situation, as has the national First Home Guarantee, which was expanded in October 2025.
Most buyers also remain cautious as cost-of-living pressures including the ongoing Middle East conflict, continue. But headline inflation has dropped slightly while interest rates have remained unchanged at 4.35% for two consecutive Reserve Bank of Australia meetings.
We’re continuing to experience a very hot rental market with this month’s Home Value Index from Cotality showing the 1.9% national vacancy rate in August is the highest since January 2025.
But there may be some good news in these record high rental numbers with Cotality’s research director, Tim Lawless, noting they may prove a constraint to rents rising further.
There was more good news in the Australian Bureau of Statistics’ latest lending indicator report. While the number of owner-occupier first home buyer loan commitments fell 2.9% in the June quarter, the total value of these loans declined by just 0.2%.
There was also no change to these loan commitments between April 2025 and June 2026.
Let’s look at the Federal Budget changes too, as the government’s key goal with their new policies was to give first home buyers extra chances and opportunities to enter the market.
These changes have resulted in a decline in investor enquiries with all of the Big 4 Lenders reporting investor loan application drops of around 17% to 28% since the budget announcement on May 12.
What is also helping first home buyers are government schemes. This includes the national First Home Guarantee scheme, or as it is now officially known, the 5% Deposit Scheme.
Introduced in January 2020, this assistance scheme has undergone some major changes since October. Income and availability caps have been removed, along with Lenders Mortgage Insurance, and property price thresholds have increased.
The basics of the scheme remain the same, with eligible first home buyers able to purchase a property with only a 5% deposit, with the federal government acting as guarantor.
But while these changes make the scheme more appealing to first home buyers, I advise them to be mindful of their budgets and not overextend themselves. It’s also a good idea to factor in future rate rises as a safety precaution. The same goes for state and territory first home buyer guarantees.
In further good news for these buyers, the correcting market has essentially given all buyers a discount on property prices, compared to listings from even six months ago. Less competition will also help buyers in this market downturn.
Historically speaking, we are already very close to the bottom of this correction so first home buyers should obtain pre-approved finance, and conduct market research soon, while sticking as close as possible to their budget.
