Lending activity rose 9.7% in the December 2025 quarter, though the sector remains well below its 2021 peak
First-home buyer loans rose 9.7% in the December 2025 quarter, recording the strongest quarterly growth in two years and reversing four consecutive quarters of decline, according to new data from money.com.au.
Despite the turnaround, first-home buyer lending remains 30% below its 2021 peak of 180,945 annual loans.
At current growth rates, the gap could narrow to 23% by the end of 2025, though a full return to 2021 levels may not occur until 2030 or later, given that rising interest rates are creating conditions broadly opposite to those that supported the previous peak.
Nick Burgess (pictured right), property expert at money.com.au, said the expansion of the 5% deposit scheme appears to be supporting lending activity but warned that broader market conditions could constrain its longer-term impact.
“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.
“While the scheme is clearly helping more first-home buyers overcome deposit barriers, affordability remains a major challenge, and the broader economic environment will ultimately determine how far this recovery can go.”
Owner-occupier loans led the December quarter recovery, growing 10% compared to 7% growth for first-home buyer investor loans.
NSW and Victoria drive national rebound
According to the money.com.au report, New South Wales contributed 1,488 of the 3,186 additional loans recorded nationally during the quarter — nearly half the total increase — and posted the strongest growth among major states at 19%, though levels remain 21% below their 2020 peak. On an annual basis, NSW shifted from a decline of 5.7% to growth of 1.8%, helping lift the national figure from -1.1% to 2%.
Victoria recorded the second-largest absolute increase, with total first-home buyer loans rising from 10,765 to 11,545. Annual loan growth in the state moved from 2.9% to 4%, pointing to a steadier trajectory in a market considered more accessible to first-home buyers. Victoria's first-home buyer owner-occupier loan volume continues to outpace NSW’s despite a smaller population — 11,082 loans compared to 8,458 in NSW.
Investor segment remains small but may grow
First-home buyer investor loans grew 7% in the December quarter but represent just 5.4% of total first-home buyer loans. The data suggests this share could rise as increasing interest rates reduce borrowing capacity for owner-occupiers, prompting some first-home buyers to consider investment properties where rental income may assist serviceability assessments.
“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,” Burgess said.
Annual first-home buyer investor loans remain down 18% year-on-year, with December’s growth only beginning to reverse a downward trend that started around September 2024. Victoria was the only major state to record a relative increase in first-home buyer investor activity, with that segment rising to 4% of total first-home buyer loans from 3.7%.
Average loan sizes reach record levels
The average first-home buyer owner-occupier annual loan size jumped 12% to $608,574, surpassing $600,000 for the first time. The $63,645 year-on-year increase is the largest quarterly rise on record, and exceeded money.com.au's earlier forecast of $570,116 by $38,458, or 6.7%.
Burgess said the result suggests many first-home buyers had previously been borrowing below their capacity due to deposit constraints.
“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,” Burgess said. “With rising interest rates, persistent inflation, and growing global economic pressures already squeezing households, these broader forces are likely to expose the limits of demand-side housing support if supply remains constrained.”
States typically regarded as more affordable recorded the sharpest increases in average loan size. Queensland’s average first-home buyer loan rose by $90,054 to $624,674, a 17% increase, while Western Australia climbed $84,972 to $582,045, also up 17%. South Australia posted 13% growth. All three now exceed Victoria’s average loan size, despite Victoria continuing to record the highest volume of first-home buyer loans nationally.
NSW’s 9% growth in average loan size trailed the national figure, indicating that first-home buyers in the state are using the scheme primarily to clear deposit hurdles rather than to access larger mortgages.
If the 12% quarterly growth trajectory continues through 2026, the average national first-home buyer loan size could reach $679,653 by year-end — an increase of $71,079.
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