Fewer first home buyers are applying for home loans. New Equifax figures show first home buyer loan applications in September were 22.1% lower than a year earlier, the third month in a row the gap has widened. That’s happening even though the expanded 5% Deposit Scheme has just had its biggest year on record. For many would-be buyers, the deposit is no longer the main hurdle. What’s holding them back now is how much a lender will let them borrow at today’s rates, and whether they feel confident taking on a big loan. Here’s what the numbers say, and what still works if you’re trying to buy your first home.
The short version
- First home buyer loan applications fell 22.1% year on year in September, after falls of 20.1% in August and 19.2% in July (Equifax, reported by realestate.com.au on 13 October).
- The average first home buyer loan is at a record of about $743,000, according to Equifax.
- Meanwhile 102,594 first home buyers used the 5% Deposit Scheme in the year to 1 October, including 4,495 in South Australia (Federal Government figures).
- The cash rate is 4.60% after four rises this year, and the RBA minutes released today keep the door open to more.
- On a $743,000 loan, repayments are about $4,570 a month at 6.24%, and a lender would typically test you at about $6,107 (Loanworth calculation, example only).
Fewer first home buyers are applying
Credit bureau Equifax tracks how many people apply for credit, which makes it one of the earliest signals of what buyers are doing. Its latest Consumer Market Pulse, reported by realestate.com.au this morning, shows first home buyer applications for new home loans have fallen further behind last year in each of the past three months:
| Month (2026) | First home buyer applications, change on a year earlier |
|---|---|
| July | −19.2% |
| August | −20.1% |
| September | −22.1% |
Part of that gap is because late 2025 was unusually busy. First home buyers rushed in after the 5% Deposit Scheme was expanded on 1 October 2025, so this year is being compared with a strong period. Even so, the trend is clearly down. In August, Equifax said the 20.1% fall was the steepest annual decline for first home buyers since 2022, while overall mortgage demand was down 14.1%.
Equifax chief solutions officer Kevin James put it this way: “Rather than taking on expanded debt commitments in a sustained high-rate environment, Australian households are taking a decisive step back.”
Why it’s surprising: the deposit scheme just had its biggest year
On 1 October the Prime Minister and Housing Minister released figures marking a year since the 5% Deposit Scheme was expanded. Income caps were removed, places became unlimited and property price caps were lifted. According to the Government:
- 102,594 first home buyers used the scheme in the past year, and more than 280,000 have been supported since 2022.
- In South Australia, 4,495 buyers used it in the past year (10,436 since 2022).
- About one in two first home buyers nationally now use a first home buyer scheme.
- The estimated saving on lenders mortgage insurance is around $23,700 for a national median-priced home bought with a 5% deposit.
- 99% of scheme borrowers are ahead of or on track with repayments.
Those are the Government’s figures and claims. But they point to something useful for buyers: getting together a 5% deposit without paying mortgage insurance is now possible for many more people than it was two years ago. If fewer people are applying anyway, the deposit isn’t what’s stopping them.
What’s really holding people back
Borrowing power
Loan sizes are already at records, and the Reserve Bank has lifted the cash rate four times this year, to 4.60% on 29 September. Every rise reduces how much a lender will let you borrow on the same income. Mr James pointed to “strict serviceability testing, high interest rates, and broader cost-of-living inflation” as the factors eroding confidence, and said bridging “the deposit and repayment threshold” is getting harder without institutional or family support.
Confidence
The Westpac–Melbourne Institute survey released on 6 October found overall consumer sentiment fell 4.7% to 80.4 after the rate rise. Just over 80% of people surveyed after the decision expect mortgage rates to rise over the next 12 months. There is a small bright spot: the “time to buy a dwelling” index rose 3.4% to 88.4, with a bigger lift among 25 to 34-year-olds. Still, in nearly every group more people think it’s a bad time to buy than a good time.
Rates may not be finished
The minutes of the Reserve Bank’s 28–29 September meeting, released this morning, show the Board judged that several upside risks to inflation had materialised. It said it would remain attentive to the data and would do what it considered necessary, “including increasing the cash rate target further if required”. The minutes also noted that housing prices had fallen by more than expected and new home loan commitments had dropped sharply, led by investors. Economists are split on whether the next rise comes on 3 November. We cover who expects what in Is another rate rise in November already locked in?
What the official lending figures say
Equifax measures applications. The Australian Bureau of Statistics measures loans that lenders have actually committed to, which is a different thing and lags behind. The latest ABS figures, for the June quarter of 2026, still looked steady for first home buyers: 29,319 owner-occupier first home buyer loans worth $18.4 billion, down 2.9% on the March quarter and unchanged on a year earlier. Total new home loans fell 5.4%, and investor loans fell 8.6%.
So the official numbers haven’t yet shown a sharp drop for first home buyers. The Equifax application data, which covers the months since, is the early warning sign. The two measures shouldn’t be mixed: one counts people applying, the other counts loans approved.
What a $743,000 loan looks like at today’s rates
To show why borrowing power is the sticking point, here’s Equifax’s average first home buyer loan at today’s rates. The example uses Westpac’s 6.24%, the lowest big-four variable rate after the 9 October rise as reported by Aussie, over 30 years with principal and interest repayments.
| Loan | Rate | Monthly repayment |
|---|---|---|
| $743,000 | 6.24% (example variable rate) | about $4,570 |
| $743,000 | 9.24% (rate plus a typical 3-point buffer) | about $6,107 |
Loanworth calculation, rounded, example only. Actual repayments and assessment rates vary by lender. Lenders generally check that you could still afford the loan if your rate were about 3 percentage points higher. That’s why the second figure matters so much. Your income and expenses have to support roughly $6,100 a month, not $4,570, before a lender will approve this loan. Lower variable rates are available from some lenders (Aussie’s 12 October list started at 6.04%), but the buffer still applies.
What still works if you’re trying to buy
Know your real number first
Before you fall for a property, get your borrowing power worked out at today’s rates. If you got a pre-approval before 29 September, it may now be worth less than you think, so ask for it to be rechecked before you bid or sign.
Use the deposit help, but compare your options
The 5% Deposit Scheme has no income caps or place limits now, but it’s only available through participating lenders, and property price caps still apply. Check the cap for your area on the Housing Australia website. The scheme is often a great fit, but not always the cheapest. It can be worth comparing it with a family guarantee, or with paying mortgage insurance at a sharper rate from a lender outside the panel.
A quieter market can help buyers who are ready
With fewer first home buyers and fewer investors competing, and prices down from their March peak (see our Cotality home values article), well-prepared buyers may find a bit more room to negotiate and more time to do their checks. That isn’t a prediction about prices. It just means having your finance sorted before you look puts you in a stronger position.
Leave yourself a buffer
Rates could go up again. Plan for a repayment you could still manage if they did, and try to keep some savings aside after settlement rather than putting every dollar into the deposit.
Compare the right rate
When you’re comparing loans, look past the headline rate to the comparison rate, fees and features. Our guide Advertised rate or comparison rate? explains what each number tells you.
Related reading
For where rates could go next, read Is another rate rise in November already locked in? What the banks, the markets and the data are saying. For how to compare loan offers, see Advertised rate or comparison rate? Which number to look at when rates are rising. For what’s happening to prices, read our Cotality home values update.
Thinking about your first home?
Book a no-obligation chat and we’ll work out what you can borrow at today’s rates and which options might suit you, including the 5% Deposit Scheme. We’ll start with general information, and if you want personal recommendations we’ll do a proper fact-find first. There’s no cost and no pressure.
Sources: realestate.com.au, “First home buyers flee property market as loan demand drops for third straight month”, 13 October 2026 (Equifax Consumer Market Pulse, September 2026, and comments from Equifax chief solutions officer Kevin James). Australian Broker, “First-home buyers sink as older Australians drive a credit rebound”, 15 September 2026 (Equifax Consumer Market Pulse, August 2026). Prime Minister and Minister for Housing, joint media release, “Helping 100,000 first home buyers into a home of their own”, 1 October 2026. Australian Bureau of Statistics, Lending Indicators, June Quarter 2026. Westpac–Melbourne Institute Consumer Sentiment, October 2026 (released 6 October 2026). Reserve Bank of Australia, media release 2026-27, 29 September 2026, and Minutes of the Monetary Policy Board Meeting, 28–29 September 2026 (released 13 October 2026). Aussie, “What experts predict for the RBA’s November 2026 interest rate decision”, 6 October 2026, and “This week’s low-rate home loan products”, 12 October 2026. Repayment example: Loanworth calculation, rounded, example only. Government figures and statements are the Government’s own.
General information only, not credit advice. It doesn’t take your objectives, financial situation or needs into account.
Loanworth Pty Ltd (Credit Representative Number 547934) is a Credit Representative of Connective Credit Services Pty Ltd (Australian Credit Licence 389328).