Anthony Albanese’s government tried to save the Great Australian Dream with government backing for home loans. The Reserve Bank has thwarted the attempt.
Thousands of would-be first home buyers across Australia are putting the great Australian dream on pause after an Albanese government effort to save them failed.
Despite federal government efforts to turbocharge first-home buyers chances of breaking into the market by expanding the nation’s 5 per cent deposit scheme to near limitless levels in October, 2025, Equifax data has revealed the RBA’s last three interest rate hikes have led to a 9.2 per cent decline in first-home buyer loan demand compared to a year ago.
Even with the RBA widely tipped to hold rates at its June meeting, experts believe it will take until at least next year before hopes for the Great Australian Dream begin to rise again.
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Consumer credit firm Equifax’s analysis shows the first-home buyer pain is being led by Queensland, where there was a 16.2 per cent decline in demand for first-home buyer loans this May compared to at the same time in 2025, and Victoria, down 15.3 per cent.
And it’s Millennials who’ve born the brunt of the RBA’s efforts to fight inflation, with a 16.3 per cent decline in demand from those aged 26-35 years old.
It means that for every 100 Australians who were looking to buy a home in that age bracket a year ago, there are 16 who have had to abandon that dream today.
Changes to the nation’s first-home deposit scheme in October last year have had the federal government step in as a guarantor on loans for up to 95 per cent of the value of the home for first-home buyers, so long as they purchase under certain price caps broken down by state and city.
Anthony Albanese’s government announced a broadening of the federal government’s main assistance program for first-home buyers in October, 2025. Picture: NewsWire/Martin Ollman.
Older, smaller home price caps and income limits were scrapped in the changes.
But seven months after they were implemented, first-home buyer loan demand has plunged.
Equifax’s Moses Samaha said while a month ago rate rises had led to a “slight handbrake” on mortgage demand, this month the stats showed the “impact has well and truly hit with an observed significant decline”.
“It’s not good, especially when you have all the programs to support them being put into place,” Mr Samaha said.
He noted that the statistics reflected thousands of potential Aussie first-home buyers putting their dream on pause in what was “quite a concerning outlook”.
While broader global uncertainty and the cost of living, as well as fears about the then looming federal budget could have also driven down demand, he noted the nation’s third rate hike for the year in April had likely been the biggest impact.
The numbers would also point to an extension of Australian Bureau of Statistics data, which in March indicated the number of loans being written across the nation was in decline — with close to 10,000 fewer loans signed off around the nation in the March quarter compared to the final three months of the year, in seasonally adjusted figures. Only about 1350 of that fall was first-home buyers, with the Equifax data suggesting a bigger reduction ahead.
Mr Samaha added that while first-home buyers had initially continued unabated as the cost of money began to rise, thanks to the backing of the Albanese government’s expanded 5 Per Cent First Home Buyer Deposit scheme, the trend had shifted in that corner of the market.
Equifax executive general manager product marketing and sales Moses Samaha believes for many, the Great Australian Dream is on pause until 2027.
“But now, after successive rate hikes, those initial government boosts have been washed out by the realities of a high-rate market,” he said.
“They just have very little wiggle room to service loans.”
The hit has been so hard that it’s helped dragged the nation’s overall demand for loans down, with a 6.6 per cent decline recorded this May compared to last for all property loan categories.
To reverse the situation, Mr Samaha said it would take multiple rate cuts in a row — and even then it could take until next year for confidence to recover to levels before the rate hikes began.
Even a hold from the Reserve Bank today would not stop the decline in homeownership aspirations, he warned.
Another hike would make it “almost impossible to get into the market” for many Australians.
He said with the Albanese government’s homebuyer support scheme failing in the face of multiple rate hikes, their best chance at helping young Australians into a home was in getting more homes built — a goal that is also being missed around the nation.
Ray White chief economist Nerida Conisbee said an announcement of a peace deal in the Middle East was already having an impact on the price of oil, and could be a sign of improvements for the economy — and it was increasingly unlikely we would see further rate hikes this year.
Ray White chief economist Nerida Conisbee believes rate hikes might be over, but cuts are a long way off yet.
“But I think we’re still a fair way off a cut,” Ms Conisbee said.
“Maybe next year.”
The economist added that reduced loan demand would also be bad for super funds, and state budgets, as it could impact revenue at major lenders and would likely cut back stamp duty collections for government coffers.
“And there’s less capital gains tax when there are less sales,” she said.
Worse, with the May budget not yet showing in lending figures but expected to cause further declines in investor activity, Ms Conisbee said further negatives in lending should be anticipated.
“There will be a huge withdrawal of investors, and that hasn’t come through yet, but that will definitely hit the market soon,” she said.
MoneyCat Finance boss cat Evan Davis said he had seen further worrying signs for the market as fewer developers were comfortable with the lending and buildings costs for boutique townhouse developments — effectively undermining the short and medium-term supply of homes typically attractive to younger Australians.
First-home buyer hopes of getting a home have been paused as the cost of borrowing turned against them.
He added that a lot of the brokers he spoke with were reporting they were busy arranging pre-approvals for first-home buyers, but that many were not proceeding to purchase a home.
Mr Davis estimated it was now taking many first-home buyers a “minimum” one year to purchase a home, and in many cases much longer — suggesting that impacts to lending activity could have long-reaching consequences.
He also warned buyers should be anticipating that interest rates at current levels could be the “new normal”, though further hikes were looking unlikely this year.
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