First home buyer mortgages have climbed substantially since the federal government expanded its 5% Deposit Scheme, while rate rises have eroded its upfront financial benefits.
First home buyer (FHB) mortgages have climbed almost $50,000 since the federal government expanded its 5 per cent Deposit Scheme, while four subsequent rate rises have eroded its upfront financial benefits, according to analysis of lending data by Primara Research.
Its analysis of Australian Bureau of Statistics (ABS) lending indicators put the average first home buyer loan at $610,063 in June 2026, an increase of $49,800 following the October 2025 expansion.
The findings highlight the widening divide between the cash needed to enter home ownership and the ongoing cost of servicing a mortgage.
The government removed income caps and limits on scheme places from 1 October 2025.
Eligible buyers can purchase with a 5 per cent deposit without paying lenders mortgage insurance, reducing the initial savings hurdle.
Repayments eat into upfront relief
Primara’s modelling estimated additional repayments of about $587 a month over a 30-year term, against an upfront deposit reduction of approximately $96,000, with a modelled break-even point of 13.7 years.
The research also found that four rate increases since October had already absorbed more than one-third of that upfront benefit.
Peter Drennan, Primara Research’s head of research and data, said larger mortgages were helping FHBs keep pace, but directing more of their finances towards housing debt.
“First home buyers are keeping pace with the market for the first time in two years, but it’s coming with a loan nearly $50,000 bigger, all committed to the mortgage, not spending money,” Drennan said.
“An extra $587 a month changes how a new homeowner budgets, and rising rates only make that harder to plan around.”
He said that the consequences differed between buyers who lacked a larger deposit and those who retained savings while choosing to borrow more.
“Some didn’t have that last deposit saved, so the extra $587 a month comes out of an already tight budget. Others had it ready and chose to keep it in the bank, carrying the same $587 a month but with cash on hand for furnishing. How they set up their new home depends on which one they are.”
Larger loans, fewer borrowers
Average FHB loan sizes surged 8.5 per cent in the December quarter, the strongest quarterly increase since the series began in September 2002, before adding just 0.4 per cent across the next two quarters.
Non-first FHB loan sizes increased 4.4 per cent over the comparison period.
The analysis also found that FHB growth outstripped the broader market in seven jurisdictions, with Western Australia recording the largest increase, at 16 per cent.
However, seasonally adjusted FHB loan numbers were 2.3 per cent below the pre-expansion quarter and 39.9 per cent below their June 2009 peak of 50,097. Western Australia alone recorded falling buyer numbers.
On an annual basis, FHB lending grew 3.3 per cent to June, compared with 1.9 per cent elsewhere, returning to growth for the first time since September 2024.
[Related: Help to Buy broker access grows as fourth lender joins]
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