Number of FHB loans declined on a yearly basis in lead up to 5% deposit scheme expansion
Labor’s First Home Guarantee Scheme has its critics, but recent analysis from money.com.au shines a light on the critical need to help first-home buyers (FHBs) in an increasingly tilted housing market.
Using Australian Bureau of Statistics data as of September 2025, money.com.au’s latest Mortgage Insights report shows that the number of FHB loans declined by 3% on a yearly basis.
That is compared to an 8% growth rate among all other buyers combined in the same period.
The wider whole owner-occupier segment saw 3% growth in the same period, while investor loan numbers surged by 9%.
Investor lending is now up by nearly a third from September 2023 levels and on a quarterly basis, has reached its highest level since the March quarter of 2022.
The sharp rise in investor lending has led to speculation that the Australian Prudential Regulation Authority (APRA) may reintroduce measures to limit its growth.
It would not be an unprecedented move – Between 2014 and 2017, APRA implemented measures such as a 10% annual growth cap on investor loans and a 30% ceiling on interest-only lending to moderate the housing market.
“APRA has a good record of regulation and supervision of the banking sector, and it has demonstrated historically that it has the tools available – and the ability to step in, when required – to tackle any potential system risks,” Nico DeLange, banking analyst at S&P Global Ratings, recently said in a The Sydney Morning Herald report.
“We expect APRA to tap these sorts of tools again, if necessary, to support financial system stability in the Australian banking system,” he added.
First-home buyers get government leg-up
While FHBs continue to be priced out of the market amid runaway investor appetite, the recently expanded First Home Guarantee Scheme has helped to level the playing field.
Under the expansion, every FHB in Australia, regardless of income, is able to buy a home with just a 5% deposit, without coughing up for cost lenders mortgage insurance (LMI).
But there are valid criticisms of the scheme.
AMP Bank’s chief economist Shane Oliver has slammed it as a “totally ridiculous” policy that will only serve to inflate already sky-high property prices.
While these adjustments may benefit those with existing property portfolios and early FHG participants, Oliver warned that “for everybody else down the queue, the price just goes up by the same amount.”
“The only people that get a benefit from it are you and me, because our house prices go up,” said Oliver of such policies.
Recent Cotality data shows that properties valued under the scheme’s pricing caps (i.e., homes that can be purchased with a 5% deposit) outperformed others in October, although, as the saying goes, correlation does not equal causation. Unsustainable net migration levels have also been blamed for house price inflation, including by Commonwealth Bank chief executive Matt Comyn.
Support at the margins
Money.com.au property expert Debbie Hays warned that the First Home Guarantee “will give first home buyers a lift, but only at the margins. Deposit support helps, but it doesnʼt solve the bigger issues of tight borrowing capacity, high prices and limited new supply”.
She echoed the sentiment of nearly every expert on the market who contend that the market will remain tiled without supporting -supply side growth.
“When borrowing for new builds continues to go backwards, itʼs a clear sign that supply isnʼt keeping up, and more buyers are being pushed to compete for existing properties. That inevitably drives prices higher, and with it, the average debt size,ˮ Hays said.
