What Four Rate Rises Have Done to the First Home Buyer Head Start

A year ago, the rules changed for first home buyers. From 1 October 2025, the government's 5 per cent deposit scheme opened up to everyone, with the income caps and place limits removed. Buyers no longer needed a 20 per cent deposit to avoid lenders mortgage insurance, the fee a lender charges when you're borrowing a larger share of the property's value. For many people, that single change made the difference between buying this year and buying in five years' time.

New analysis from Primara Research, reported by The Adviser and Elite Agent this month, gives us a year's worth of data to see how that head start is actually playing out. The short version is that the deposit hurdle really did come down. The repayments did not.

Where the numbers landed

The average first home buyer loan reached $610,063 in the June quarter, according to Primara's analysis of Australian Bureau of Statistics lending figures. That's about $49,800 higher than before the scheme widened, a jump of close to 9 per cent in loan size alone. Most of that increase came quickly, in the first quarter after the change, before settling into much smaller growth after that. Over the same period, loans to buyers who weren't using the scheme grew at roughly half that pace.

Put plainly, first home buyers are borrowing more than they used to, and they're doing it faster than everyone else in the market.

The repayment side of the ledger

Primara puts the upfront saving from the scheme, between the smaller deposit and the waived mortgage insurance, at around $96,000 for the average buyer. That's a genuinely large number, and it's the reason the scheme has been so popular.

But a bigger loan comes with bigger repayments, and Primara's modelling puts the extra cost of that larger average loan at roughly $587 a month over a 30 year term. At that rate, it would take close to fourteen years before the extra repayments outweighed the upfront saving. That calculation assumes rates stay where they were when the scheme opened.

They haven't. The cash rate has risen four times this year to reach 4.60 per cent, the highest level since late 2011. Primara's analysis suggests those four increases alone have already absorbed more than a third of the upfront benefit buyers thought they were banking. Peter Drennan, Primara's head of research, makes the point that not every buyer using the scheme is in the same position. Some stretched to cover the deposit and have little room to move. Others kept cash aside for furniture and moving costs, and have more buffer to absorb higher repayments. For the first group especially, the gap between the headline saving and the lived experience of higher repayments is worth understanding before it shows up on a bank statement.

Why the serviceability buffer still matters

None of this means the scheme was a bad idea, and it doesn't mean first home buyers made a mistake by using it. It does mean the smaller deposit was never the whole story. Lenders still assess whether a borrower could manage their repayments if rates rose further, testing affordability against a rate three percentage points above what's actually on offer. That buffer is set by APRA and was last confirmed as current in May, and it exists for exactly this kind of situation, where the cost of a loan can change well after settlement.

A smaller deposit gets you to the starting line sooner. The serviceability test is still the thing that decides how big a loan makes sense for your income, regardless of how you got there.

What this means if you're buying

If you're weighing up the 5 per cent deposit scheme now, the deposit saving is real and worth having. So is the obligation that comes with the loan behind it. Before settling on a number, it's worth asking what your repayments would look like not just at today's rate, but at a higher one. A broker can run that comparison with you, using your actual income and expenses rather than an average, so the loan amount you land on reflects your own buffer, not just the headline saving available to everyone.

The scheme changed who can get to the front door. It didn't change the arithmetic of what happens once you're through it.

Figures: average first home buyer loan size, upfront savings and repayment modelling are from Primara Research's analysis of ABS lending indicators data, as reported by The Adviser (19 October 2026) and Elite Agent (8 October 2026). The cash rate and APRA serviceability buffer figures reflect the RBA's most recent decision and APRA's May 2026 statement on macroprudential settings.

This article is general information only and does not take into account your personal objectives, financial situation or needs. Please speak with a Claremont Financial broker before making any borrowing decision.