Getting onto the property ladder has rarely been straightforward. But higher interest rates are adding another hurdle for Australians trying to buy their first home.
According to the Australian Bureau of Statistics (ABS), the number of new owner-occupier first home buyer loan commitments fell 2.9% between the March and June 2026 quarters, following a 3.6% fall in the March quarter.
The decline comes after three Reserve Bank of Australia (RBA) cash rate increases in 2026, which lifted the cash rate from 3.60% to 4.35%. Higher rates can reduce the amount buyers are able to borrow because lenders assess whether applicants can afford repayments at rates above the actual loan rate.
But there is another interesting story within the lending figures. While the number of first home buyer loans fell, the total value of lending to this group actually increased 0.2% over the June quarter to $18.4 billion.
In other words, buyers need bigger loans just to keep pace with property prices, even as fewer of them qualify to borrow at all.
So what is helping those buyers get into the market despite higher rates and reduced borrowing capacity?
Part of the answer may lie in the range of pathways now available to first home buyers. It used to be that a 20% deposit was the standard starting point, but today’s buyers may have other options that allow them to purchase with a smaller deposit, access financial support or share the cost of buying a home.
Recent data suggests many first home buyers are already purchasing without reaching that traditional 20% benchmark.
Commonwealth Bank numbers show the average first home buyer is now 33 years old, has a home loan of around $480,000 and purchases with a deposit of approximately 16%.
Of course, while it is possible and increasingly more common, that doesn’t mean every buyer should aim for a smaller deposit. A larger deposit can reduce the amount you need to borrow and may help you avoid lender’s mortgage insurance (LMI).
But if saving 20% is the factor holding you back, it’s important to know that it isn’t necessarily the only option.
Depending on your circumstances, there are several ways to buy a home with less than 20% deposit.
The federal government’s 5% Deposit Scheme allows eligible first home buyers to purchase with a deposit from 5%, with the government guaranteeing part of the loan so the buyer doesn’t need to pay LMI. Property price caps and other eligibility requirements apply.
Alternatively, some lenders offer loans above 80% loan-to-value ratio (LVR) with LMI. LMI is an insurance policy that protects the lender, not the borrower, if the borrower can’t repay the loan and the property sale does not cover the outstanding debt. The borrower usually pays the LMI premium either upfront or by adding it to the loan. This increases the total cost of buying. However, it can allow someone with a smaller first home buyer deposit to enter the market sooner.
Another option is a guarantor loan. Typically, a parent or close family member uses equity in their property as additional security for the loan, potentially reducing the cash deposit required and helping the borrower avoid LMI.
The First Home Super Saver (FHSS) scheme can also help eligible buyers build their deposit.
Instead of withdrawing your compulsory super, the FHSS scheme lets you make extra voluntary contributions and later withdraw eligible amounts, plus earnings, to help buy your first home. You can contribute up to $15,000 per financial year and $50,000 in total under the scheme.
National programs aren’t the only support available. Each state and territory also has its own first home buyer grants, stamp duty concessions and other assistance, with different property price limits and eligibility rules.
In New South Wales, for example, eligible buyers may be able to access the First Home Owner Grant for a new home as well as stamp duty exemptions or concessions through the First Home Buyers Assistance Scheme. Other states and territories offer their own combinations of grants, duty relief and shared-equity support.
Because the rules vary depending on where and what you buy, you should ask a first home buyer mortgage broker what may apply before setting your budget.
Download Shore Financial’s First Home Buyer Schemes Guide for an overview of the national, state and territory programs available.
Changing how you buy can sometimes be as important as changing how you finance the purchase.
Buying with a partner, friend or family member can allow two incomes and deposits to be combined. The ownership structure, exit strategy and each person’s financial responsibilities need careful consideration before entering a co-ownership arrangement.
Another option is rentvesting where, instead of purchasing a home where you want to live, you buy an investment property in a more affordable location while continuing to rent elsewhere. But this won’t suit buyers wanting to access owner-occupier first home buyer concessions, so the trade-offs should be considered carefully.
You can read more about these options in our first home buyer guide.
With borrowing capacity under pressure, choosing any of these alternative pathways to ownership may help first home buyers access the market sooner.
But different lenders can assess the same borrower differently, while the 5% Deposit Scheme, LMI, guarantor arrangements and other lending options all have their own requirements and costs.
A first home buyer mortgage broker can assess your borrowing capacity, compare lenders and help you understand which options you may qualify for before you decide how much longer you need to save.
If you’re building a first home buyer deposit or wondering whether you could buy sooner than you thought, speak to a first home buyer mortgage broker at Shore Financial. We can review your position, explain the options available and help you build a finance strategy for your first property. Call us on 1300 416 700, email info@shorefinancial.com.au or get in touch today.
Do first home buyers need a 20% deposit in Australia?
No. While a 20% deposit can help you avoid LMI, eligible buyers may be able to purchase with a smaller deposit through the 5% Deposit Scheme, paying LMI, using a guarantor loan or the First Home Super Saver Scheme.
What is the Australian Government 5% Deposit Scheme?
The 5% Deposit Scheme allows eligible buyers to purchase a home with a deposit from 5%, with the federal government guaranteeing part of the home loan. This can allow the borrower to avoid LMI. Property price caps and eligibility requirements apply.
Can I use my super to buy my first home?
Eligible buyers can use the First Home Super Saver scheme to release certain voluntary contributions made to super, plus associated earnings, towards their first home. It is different from simply withdrawing compulsory super savings.
What is lender’s mortgage insurance?
Lender’s mortgage insurance, or LMI, is insurance that protects the lender if a borrower defaults and the lender suffers a loss. It is commonly required when borrowing more than 80% of a property’s value, although exceptions apply.
Can I get a first home buyer loan with a 10% deposit?
Potentially. Many lenders offer loans to borrowers with deposits below 20%, although lending criteria, interest rates and LMI costs can vary. Government schemes and guarantor loans may provide other options.
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