Today’s market is looking a little different.
With more properties available in many areas and less competition than we’ve seen in recent years, first-home buyers could have more time to explore their options, compare properties and make informed decisions before making an offer.
While affordability remains a challenge for many Australians, changing market conditions could create opportunities for buyers who are prepared and have their finance in order.
If you’re hoping to purchase your first home, here’s what you need to know about the current lending and housing market.
Many aspiring homeowners are still keen to enter the property market, but higher borrowing costs and affordability challenges are encouraging buyers to take more time before making a move.
Recent data showed mortgage demand from first-home buyers fell 20.1% nationally compared to a year earlier, while the average first-home buyer loan size remains at a record high of $740,000.
Meanwhile, the Reserve Bank of Australia (RBA) raised the cash rate again in September for the fourth time this year in response to persistent inflation. It’s now sitting at 4.6% and many lenders were quick to update their variable home loan rates following the 0.25% increase.
Although that might sound discouraging, a slowdown in buyer activity can have a silver lining. With fewer buyers actively competing for properties in some markets, those who are financially prepared could find that they have more time to research, negotiate and make confident purchasing decisions.
More importantly, support remains available for eligible buyers. The Australian Government 5% Deposit Scheme allows eligible first-home buyers to enter the market with a deposit as low as 5%, without paying Lenders Mortgage Insurance (LMI).
The next cash rate decision will be announced on 3 November. At this stage, economists are divided as to whether the RBA will raise the cash rate again or leave it on hold for the remainder of 2026. However, many unfortunately believe that rate relief could be more than a year away.
For buyers who have been waiting for conditions to become a little less competitive, today’s market could potentially present an opportunity worth exploring.
One of the biggest challenges first-home buyers have faced in recent years has been competing with investors. However, recent market changes appear to be reshaping that dynamic.
Following the Federal Government’s changes to negative gearing and capital gains tax settings, investor activity has slowed considerably. New investor loan commitments fell 8.6% in the June quarter, marking the steepest quarterly decline in almost four years.
While first-home buyer lending has also softened, the decline has been less pronounced, with approved first-home buyer loans falling 2.9% over the same period.
A reduction in investor demand could help ease competition in some parts of the market. For first-home buyers, that could mean more choice, more time to consider a purchase and, in some cases, greater negotiating power than during the highly competitive conditions seen in recent years.
Property prices have continued to ease in many parts of Australia, with national housing values declining 1.1% in September. Brisbane recorded the largest monthly decline (-1.5%), while Darwin was the only capital city to see values rise.
At the same time, housing turnover has slowed and properties are generally taking longer to sell. While fewer homes are being listed for sale, the increase in selling times has led to a build-up of available stock across many markets.
For first-home buyers, this could create a more favourable buying environment than we’ve seen in recent years. More available properties can mean greater choice, less pressure to make rushed decisions and more opportunity to negotiate before making a purchase.
Of course, every market is different, but buyers who have their finance organised could find they’re in a stronger position to take advantage of opportunities as they arise.
There’s no denying that higher interest rates have made an impact for many first-home buyers. Borrowing power has reduced, repayment costs have increased and affordability remains a key consideration when planning a purchase.
As a rough guide, a one percentage point increase in mortgage rates can reduce maximum borrowing capacity by around 10%, although the impact varies depending on a buyer’s income, expenses, existing debts and the lender’s assessment criteria.
However, borrowing capacity is only one part of the equation.
While higher rates have made it more challenging for some buyers to enter the market, they have also contributed to less competition, softer prices in many areas and a more balanced market overall. Buyers who have their finance organised could find that they have more choice and more scope to negotiate than they would have during the highly competitive conditions of recent years.
For many first-home buyers, success in today’s market isn’t just about how much they can borrow. It’s about being prepared to take advantage of opportunities when they arise.
The Australian property market has shifted throughout the year, but successful purchasing comes down to preparation, understanding your borrowing options, and having a clear plan.
As your finance broker, we can give you a solid understanding of your borrowing capacity, as well as give you more information on any first-home buyer government incentives that could help you get a foot on the property ladder.
Get in touch today!