Australia’s first-home buyer market is staging a clear rebound, but new analysis suggests it could still take years to fully recover and that borrowers are taking on much larger debts.
Money.com.au’s latest First Home Buyer Mortgage Insights report, based on ABS Lending Indicators to December, shows first-home buyer loans rose 9.7% in the December quarter – the strongest quarterly growth in two years and a break from four straight quarters of decline.
Even so, annual first-home buyer lending remains about 30% below its 2021 peak of 180,945 loans. On current trends, the report estimates the gap may only narrow to around 23% by the end of 2026, with a full return to peak levels not expected until close to 2030 or beyond as rising interest rates work against demand‑side support.
Money.com.au property expert Nick Burgess (pictured) said the government’s expanded 5% deposit scheme is clearly boosting activity but is operating in a more hostile environment than during the last boom.
“Housing supply hasn’t increased meaningfully, interest rates are rising, and lending conditions are tightening; all of which have the potential to offset some of the scheme’s benefits and slow the pace of recovery in the first-home buyer lending space,” Burgess said.
First-home buyer owner‑occupier loans were the main driver of the turnaround, rising 10% in the December 2025 quarter compared with 7% growth for first‑home buyer investor loans.
New South Wales accounted for nearly half of the national rebound, adding 1,488 of the 3,186 additional first‑home buyer loans over the quarter. Its 19% quarterly lift still leaves it about 21% below 2020 peak levels but marks a sharp improvement after a period of decline. Victoria delivered the second‑largest increase in loan numbers and posted steadier annual growth, helped by comparatively more accessible price points.
Investor first‑home buyer loans remain a small share of the market at 5.4% of total first‑home buyer lending, with annual volumes still down 18% year‑on‑year despite the December bounce.
Burgess noted that “For some first-home buyers, the inclusion of rental income in serviceability assessments may outweigh the benefits of the 5% deposit scheme alone, making investment pathways outside the scheme a more achievable stepping stone into the property market,” as higher interest rates squeeze borrowing capacity.
The report finds the most dramatic impact of the scheme is visible in borrowing amounts. The average first‑home buyer owner‑occupier loan size jumped 12% in the year to December to a record $608,574, surpassing $600,000 for the first time. The $63,645 year‑on‑year rise is the largest increase ever recorded.
Queensland and Western Australia each recorded 17% increases in average first‑home buyer loan size, with South Australia close behind. All three now sit above Victoria on this measure, even though Victoria still generates the highest volume of first‑home buyer loans.
If the current 12% growth trajectory were to continue through 2026, the report projects the average national first‑home buyer loan could reach about $679,653, an increase of more than $71,000 in a single year.
Burgess warned that “Demand-side schemes like this can unlock the front door for more buyers, but also risk putting more fuel on the fire and pushing up property prices, increasing loan sizes, and ultimately intensifying competition,” particularly while housing supply remains constrained and interest rates stay elevated.
Get the hottest and freshest property and mortgage news delivered right into your inbox. Subscribe now to our FREE daily newsletter.
